Bagnan Estate Pvt. Ltd. V. Union of India & Ors.

WPA/13544/2024

AI Insights

The case involves Bagnan Estate Pvt. Ltd., which challenged an order under Section 147 read with Section 144B of the Income Tax Act, 1961, concerning the reopening of an assessment for the Assessment Year 2018-19 based on third-party information. The petitioner argued that the order was passed without following the principles of natural justice, specifically the right to cross-examine the third-party informant. The respondents contended that the petitioner had been given adequate opportunity to respond and did not initially request cross-examination. The court found that while the petitioner did not make a specific request for cross-examination initially, the right to cross-examine should not be entirely defeated and directed the matter to be considered afresh by the appellate authority.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 800335 (HC-MISC)
• Appeal Type: Others
• Pronouncement Date: 19-06-2024
• Assessment Year: misc
• Other Referred Cases: Bluechip Concrete Private Limited v. Union of India & Ors., Krishna Tissues Pvt. Ltd. v. Union of India & Ors., Income Tax Officer v. M. Pirai Choodi
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: PRITUHU DUDHORIA
• Assessee Lawyers: ANUJIT MOOKHERJI; PRITISH CHANDA
• Keywords: Assessment Reopening; Cross Examination; Cross-examination; Natural Justice; Third-party information; Writ petition
• Section: 147; 148; 142(1); 144B; 148A(b); 148A(d)

Judgement Text

"Form No.J(2) CALCUTTA HIGH COURT IN THE CIRCUIT BENCH AT JALPAIGURI CONSTITUTIONAL WRIT JURISDICION APPELLATE SIDE Present: The Hon’ble Justice Raja Basu Chowdhury WPA 13544 of 2024 Bagnan Estate Pvt. Ltd. Versus Union of India & Ors. For the petitioner : Mr. Anujit Mookherji Mr. Pritish Chanda For the respondents : Mr. Prituhu Dudhoria Heard on : 19th June, 2024 Judgment on : 19th June, 2024 Raja Basu Chowdhury, J : 1. Affidavit of service filed in Court today is taken on record. 2. The present writ petition has been filed inter alia, challenging the order dated 25th March, 2024, passed under Section 147 read with Section 144B of the Income Tax Act, 1961 (hereinafter referred to as the “said Act”). 3. It is the petitioner’s case that the petitioner was served with a notice dated 24th March, 2022 issued under Section 148A(b) of the said Act, for the Assessment Year 2018-19, whereby the 2 petitioner was notified that on the basis of certain third party information since it was found that the petitioner had brought back Rs.1,61,42,000/- through a fund trail disclosed therein, the petitioner was called upon to furnish written submissions. 4. The petitioner had duly responded to the said notice by writing dated 4th April, 2022 and had requested the authorities not to reopen the proceeding under Section 147 of the said Act. Notwithstanding the aforesaid, by an order dated 8th April, 2022 under Section 148A(d) of the said Act, the authorities had directed reopening of the assessment under Section 147 of the said Act. A copy of the aforesaid order dated 8th April, 2022, as placed before this Court by Mr. Mookherji, is taken on record. 5. Pursuant to the aforesaid, a notice under Section 148 of the said Act, as appearing at page 89 of the writ petition, was issued and a further notice under Section 142(1) of the said Act was also issued. Subsequently, a show cause notice dated 26th February, 2024, proposing variations in respect of the assessment for Assessment Year 2018-19, had also been issued. 6. In response to the said show cause notice, the petitioner by a communication in writing dated 2nd March, 2024, had, inter alia, contended that since, the proceedings had been initiated on the basis of a third party information, the petitioner should be permitted the right of cross-examination. 3 7. Mr. Mookherji, learned advocate representing the petitioner submits that the respondent no.3, without considering the aforesaid request made by the petitioner had purportedly disposed of the said proceedings by passing an order dated 25th March, 2024 under Section 147 read with Section 144B of the said Act. 8. According to Mr. Mookherji, the aforesaid order cannot be sustained as the same has been passed without following the principles of natural justice. Ordinarily, when an information from a third party is obtained and the assessment is proposed to be reopened on the basis of such third party information, all particulars in connection therewith should be disclosed. He submits that the petitioner having requested the authorities to afford the petitioner an opportunity of cross-examination, the same ought not to have denied by the respondent no.3. In support of his aforesaid contention he has placed reliance on the following judgments:- I) Bluechip Concrete Private Limited v. Union of India & Ors., reported in 2024 SCC Online Cal 2175; II) An unreported judgment delivered by the Hon’ble Division Bench of this Court in the case of Krishna Tissues Pvt. Ltd. v. Union of India & Ors., in MAT 648 of 2023 dated 28th April, 2023. 4 9. Mr. Mookherji submits that in both the cases, the Hon’ble Courts taking note of the failure of the natural justice and the failure on the part of the authorities to permit the assessee to cross- examine the third party witness had been pleased to remand back the matter to the authorities for hearing afresh. He submits that this case is not different from the cases cited above. In the present case, the petitioner should be afforded with the similar relief. 10. Mr. Dudhoria, learned advocate enters appearance on behalf of the respondents. He submits that the petitioner was given due opportunity to respond to the initial show cause notice issued under Section 148A(b) of the said Act. The petitioner while responding to the said show cause by a communication in writing dated 4th April, 2022 did not seek for any further particulars. The petitioner also did not seek for any opportunity to cross-examine any person(s). According to the respondents, the petitioner was well-aware with regard to the aforesaid transactions and had attempted to justify the transactions. It is only when a show cause notice indicating proposed variation in the assessment income was issued, the petitioner had sought for an opportunity of cross-examination. No particulars of the persons whom the petitioner wishes to cross-examine had been disclosed. Admittedly, the petitioner has an alternative remedy in the form of an appeal. Without availing the same, the petitioner ought not 5 to approach this Hon’ble Court, especially when the petitioner has failed to make out a case of failure of natural justice. 11. In any event he further submits that the writ petition has been filed beyond the prescribed period of limitation for filing of an appeal under Section 246 of the said Act. He submits that none of the judgments relied on by the petitioner assist the petitioner. The same are factually distinguishable. He submits the writ petition should be dismissed with costs. 12. Heard the learned advocates appearing for the respective parties and considered the materials on record. 13. Admittedly, in this case a notice under Section 148A(b) of the said Act was issued identifying therein particulars of certain transactions which involved the petitioner. The petitioner, at the first instance, by its response dated 4th April, 2022 had purported to justify the transaction by, inter alia, contending that it had taken a loan amounting to Rs.30 lakhs from M/s Madhuban Barter Pvt. Ltd., and Rs.20 lakhs from M/s Outlook Vintrade Pvt. Ltd., during the Assessment Year 2018-19. From the aforesaid, it would be apparent and clear that the petitioner did not seek for any further clarification and any further disclosure from the respondents nor did the petitioner seek for any opportunity to cross-examine the person(s) at whose instance and on the basis of the information obtained from such person, the notice under 6 Section 148A(b) of the said Act was issued. In fact, the said proceedings ultimately culminated in the order dated 8th April, 2022 passed under Section 148A(d) of the said Act. There is no challenge to the said order. Following the aforesaid, a notice under Section 148 of the said Act was issued on 11th April, 2022. 14. Subsequently, on 26th February, 2024 a show cause notice was issued indicating proposed variations in the assessment. It is only in response to the said notice the petitioner for the first time had claimed that since, the proceedings were initiated on the basis of a third party information, opportunity of cross- examination should be afforded. There are no particulars provided in the said response, as to whom the petitioner seeks to cross-examine. It also does not appear that the petitioner had made any specific request before the respondent no.3, (Faceless Assessment Center) inter alia, praying for issuance of summons on any particular person for cross-examining her/him. Although, the petitioner to substantiate the right of cross-examination has placed reliance on the judgment delivered by the Hon’ble Division Bench of this Court in the case of Bluechip Concrete Private Limited (supra), I find that in the said case after the notice under Section 148A(b) of the said Act was issued, the assessee had requested for not only copies of the statement based on the third party information but also requested for an opportunity to cross- examine. In the instant case, no such request was made by the 7 petitioner. The said judgment is factually distinguishable. The other judgment relied on by the petitioner delivered in the case of Krishna Tissues Pvt. Ltd., (supra), on issuance of a similar notice under Section 148A(b) of the said Act, the assessee in response had requested for an opportunity to cross-examine. As noted above, in the present case, there is no such request. The aforesaid judgments, in my view, do not assist the petitioner. 15. Admittedly, the petitioner has an alternative remedy in the form of an appeal. Although, the ordinary period for preferring an appeal has expired, at the same time having taken note of the prayer made by the petitioner though at the first instance no specific request for cross-examination was made, the right to cross-examine cannot be totally defeated. At the same time the entire assessment order cannot be set aside on this ground. Thus, taking note of the fact that the assessment had been reopened on the basis of third party information, I am of the view that if the petitioner approaches the appellate authority within 15 days from date by filing an appeal along with a server copy of this order with an application under Section 5 of the Limitation Act, 1963, explaining the delay appropriately, the appellate authority shall consider the same having regard to the observations made herein and the fact that the writ petition was filed within forty days from the date of passing the order 8 impugned, condone the delay and hear out the appeal and dispose of the appeal on merits. 16. It shall be open to the petitioner, in terms of the observations made by the Hon’ble Supreme Court in the case of Income Tax Officer v. M. Pirai Choodi reported in (2010) 15 SCC 283, to pray for an opportunity to cross-examine. If such prayer is made, the appellate authority shall consider the same having due regard to the judgment delivered by the Hon’ble Supreme Court in the case of M. Pirai Choodi (supra) and the observations made herein. 17. With the above observations and directions, the writ petition is disposed of. 18. Urgent Photostat certified copy of this order, if applied for, be made available to the parties upon compliance of necessary formalities. (Raja Basu Chowdhury, J.) sb "