Cherukuri Surya Narayana Murthy V. Union Of India and Income Tax Department and State Bank of India

WP/19122/2024

AI Insights

The case involves Cherukuri Surya Narayana Murthy, a business correspondent for the State Bank of India, who faced multiple notices and demands from the Income Tax Department for the assessment year 2018-19 due to non-filing of income tax returns despite substantial transactions in his bank account. The petitioner challenged the show cause notice, penalty notice, and recovery proceedings in the High Court, arguing that these actions were illegal and violated principles of natural justice. The court's decision primarily addressed the procedural compliance of the Income Tax Department and the interim relief requested by the petitioner pending the appeal's resolution.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 801200 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 25-11-2024
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961, Constitution of India
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: ANUP KARAVADI; M S DYUMANI; SATYANARAYANA DHARA
• Assessee Lawyers: V KUMAR
• Keywords: Article 19(1)(g); Assessment; Bank account freeze; Income Tax; Natural Justice; Penalty; Show cause notice; Writ of Mandamus
• Section: 147; 148; 144; 143(3); 142(1); 133(6); 274; 144B; 271AAC(1); 221(1); 226(3)

Judgement Text

"IN THE HIGH COURT OF ANDHRA PRADESH :: y^RAVATI (Special Original Jurisdiction) MONDAY ,THE TWENTY FIFTH DAY OF NOVEMBER TWO THOUSAND AND TWENTY FOUR PRESENT THE HONOURABLE SRI JUSTICE G.NARENDAR AND THE HONOURABLE SMT JUSTICE KIRANMAYEE MANDAVA WRIT PETITION NO: 19122 OF 2024 Between: Cherukuri Surya Narayana Murthy, S/o Murali Krishna Rao, aged 48 years, Occupation SBI CSP KIOSK, R/o 3-94, K-Pedapudi, Ambajipeta Mandal, East Godavari District, Andhra Pradesh. ...PETITIONER AND 1. The Union Of India, Represented by its Secretary, Ministry of Finance (Income Tax Department), New Delhi. 2. The Income Tax Department, Income tax office. Ward No.1, Amalapuram, College Road, Konkapalli Road, Amalapuram, Andhra Pradesh, Represented by its Officer. 3. The State Bank orindia, , Main Road Ambajipeta Branch, Ambajipeta, East Godavari District, Andhra Pradesh, Represented by its Manager. ...RESPONDENTS Petition under Article 226 of the Constitution of India praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a writ or order or direction more particularly one in the <3r nature of writ of mandamus declaring the action of the respondents more particularly the 2 nd respondent in issuing show cause notice for the assessment years 2018-19 dated 27.02.2023 further notice for penalty under section 274 R/W Section 271AAC (1) of the Income Tax Act 1961 dated 27.03.2023 as well as the demand under section 221 (1) of the Income Tax Act, 1961 dated 06.12.2023 and a notice under section 226 (3) of the Income Tax Act, 1961 dated 19.02.2024 and in freezing the accounts of the petitioner maintained with the 3rd respondent bank in current account nos 31935853162, 31935855863 and in SB account No.30499744936 and also the gold loan accounts of the petitioner in-spite of the clarification of the 4th respondent bank in letters dated 10.04.2023 and 02.03.2024 as illegal, arbitrary and also oppose to all cannons of justice as well as oppose to principles of natural justice and article 19 (1) (g) of the constitution of India consequentially direct the 3rd respondent to consider the case of the petitioner a fresh basing on the clarification of the 3 rd respondent bank in letters dated 10.04.2023 and 02.03.2024 to withdraw the show cause notice for the assessment years 2018-19 dated 27.02.2023 and a notice for penalty under section 274 R/W Section 271 AAC (1) of the Income Tax Act 1961 dated 27.03.2023 as well as the demand under section 221 (1) of the Income Tax Act, 1961 dated 06.12.2023 as well as notice under section 226 (3) of the Income Tax Act, 1961 dated 19.02.2024 with a direction to the respondent Nos. 2 and 3 herein to defreeze the accounts of the petitioner maintained with the 3 rd respondent bank in current account nos 31935853162, 31935855863, 39342264911 No.30499744936 and also the gold loan accounts of the petitioner forthwith. and in SB account lA NO: 1 OF 2024 Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to direct the 3rd respondent to consider the case of the petitioner a fresh basing on the clarification of the 3rd respondent bank in letters dated: 10.04.2023 and 02.03.2024 to withdraw the show cause notice for the assessment years 2018-19 dated: 27.02.2023 and a notice for penalty under section 274 RA/V Section 271AAC (1) of the Income Tax Act 1961 dated: 27.03.2023 as well as the demand under section 221 (1) of the income Tax Act, 1961 dated: 06.12.2023 as well as notice under section 226 (3) of the Income Tax Act, 1961 dated: 19.02.2024 with a direction to the respondent Nos. 2 and 3 herein to defreeze the accounts of the petitioner maintained with the 3rd respondent bank in current account nos 31935853162, 31935855863, 39342264911 and in SB account No.30499744936 and also the gold loan accounts of the petitioner forthwith pending disposal of the above writ petition. Counsel for the Petitioner(s): SRI. V SAI KUMAR Counsel for the Respondent No.1: SRI ANUP KOUSHIK KARAVADI, DEPUTY SOLICITOR GENERAL OF INDIA Counsel for the Respondent No.2; M/S DYUMANI Counsel for the Respondent No.3; SRI SATYANARAYANA DHARA The Court made the following; ORDER 1 IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI THE HONOURABLE SRI JUSTICE G.NARENDAR THE HONOURABLE SMT. JUSTICE KIRANMAYEE MANDAVA WRIT PETITION NO: 19122/2024 ORDER; (PerHon’ble Smt. Justice Kiranmayee Mandava) The Writ Petition is filed assailing the show cause notice dated 27-02-2023, the notice issued under Sec.274 r/w. Sec.271AAC(1) of the Income-Tax Act, 1961, dated 27-03-2023, for assessment year 2018-19, and the consequential recovery proceedings issued under Sec.226(3) of the Act, pursuant to the assessment order. 2. The facts of the case are: The petitioner, who is an individual, was appointed as business correspondent of the 3^^^ respondent bank. The petitioner was allotted an account viz., settlement account, in the nature of a current account, for rendering services to the account holders of the bank, as an authorized agent of the Bank. The petitioner was paid commission for the services rendered by it, as per the guidelines of RBI. During the period relevant for the assessment year 2018-19, the 3. total transactions routed through the account, allotted by Bank, was Rs.1,10,46,942/-. The 2\"^ respondent issued notices to the petitioner for non filing of the income-tax returns, though the bank account held by the petitioner 2 was showing substantial receipts of income. The petitioner did not respond to the notice issued. Therefore, the department has issued the following notices: S.No. Type of notice/ communication Date of notice/ communication Date of compliance given Response of the assessee received/not received Notice u/s.148 31.03.2022 29.04.2022 No Notice u/s. 142(1) 14..11.2022 25.11.2022 No Reminder regarding compliance to initial notice u/s. 142(1) (AU-1) Letter Non- 09.01.2023 13.01.2023 No Centralized communication for 25.01.2023 30.01.2023 IV. No non-responsive cases Notice u/s.142(1) 10.02.2023 17.02.2023 V. No SCN u/s. 144 20.02.2023 24.02.2023 VI. No The petitioner did not comply with the above notices. Therefore 4. the impugned show cause notice dated 27-02-2023, was issued, to show cause as to why the proposed additions of income viz., cash withdrawals of Rs.1,00,91,000/-,cash deposits, income brokerage, etc., should not be added to the income of the petitioner. It is stated that the petitioner submitted the letters, said to have been issued by the Bank. The assessment U/s. 147 r/wSec.144Bof the Act, was made determining the total income at Rs.1,02,45,942/-.Thus demand was raised at Rs.1,66,91,830/-. % 3 Against the said order of assessment, the assessee filed appeal 5. before the Commissioner of Income-Tax (Appeals). Pending disposal of the appeal, the assessee sought for stay of collection of demand raised. Vide impugned proceedings, the assessee was asked to pay 10% of the demand in three monthly installments. Aggrieved by the said order, the assessee has approached this Court by way of the instant Writ Petition. The petitioner has also challenged the penalty proceedings initiated U/s.274 r/w Sec. 271AA(C) of the Income Tax Act. The learned Senior Standing Counsel for the Department, 6. Sri Anup Koushik Karvadi, contends that the assessment order was passed after following due procedure under the Act. In order to make third party enquiry summons were also issued to the Bank U/s.133(6) of the Act, call for details such as copy of bank statement, KYC details etc. It is stated that the Bank has not submitted any reply to the summons issued. Considered the rival submissions. 7. As observed from the material papers filed along with the Writ 8. Petition, the bank has issued a declaration dated 26-03-2022, 10-04-2023, and 02-03-2024, declaring that the petitioner is their Business Correspondent and all the financial transactions that have been routed through settlement account bearing No.31935853162, pertains to State Bank of India (Ambajipeta Branch), and the transactions reflected in the said account would not pertain to individual as the account is an account for customer service point, and it is 4 further stated that the petitioner was only paid commission by the Bank, for services rendered by him as per RBI instructions. 9. It is contended by the learned counsel for the Department that the Bank did not respond to the notices issued U/s,133(6) of the Act. The department basing on the material before it passed the assessment, which is subject matter of appeal before the Commissioner of Income -Tax (Appeals). Pending disposal of the appeal, the petitioner has sought stay of collection of taxes. The Department passed an order on the application of the petitioner to pay the 10% of the demand in three monthly equal installments. The 3'*^ respondent did not file its counter affidavit in the case nor any submissions were advanced on its behalf. 10. Having regard to the submissions made, we are of the view that in the interests of justice 10% of the demand of Rs.1,02,45,942/ - i.e., Rs. 16,69,200/-, that was sought to be recovered from the petitioner, through impugned notice of 226 (3) of the Act, may be remitted by the 3'^' respondent Bank pending disposal of the appeal before the CIT(A), filed against the assessment order. 11. We therefore direct the 3'^' respondent - Bank to remit from the accounts of the Bank, an amount of Rs.16,69,200/-, to the Income-Tax Department, in compliance to the order of the Commissioner dated 12.06.2024, pending disposal of the appeal. 12. 5 13. Needless to observe that pending disposal of the appeal before the CIT(A), the penalty proceedings initiated under Sec.274 r/w Sec.271 AAAC (1) for the subject assessment year i.e., 2018-19, may be kept in abeyance. The observations made by us herein above are only for the purpose of deciding the present Writ Petition. We have not expressed our views as regards the merits of the issue involved in the appeal. With the above observations, the Writ Petition stands disposed of. 14. There shall be no order as to costs. As a sequel, interlocutory applications pending, if any, shall stand SD/- M. PRABHAKAR RAO ASSISTANT REGISTRAR closed. //TRUE COPY// F SECTION OFFICER To, Ministry of ^^ance (Income Tax 1. The Secretary, Union Of India, Department), New Delhi. 2. The Officer, Income Tax Department, Income tax office, Ward No.1, Amalapuram, College Road, Konkapalli Road, Amalapuram, Andhra Pradesh. State Bank of India, Main Road Ambajipeta Branch, 3. The Manager, Ambajipeta, East Godavari District, Andhra Pradesh. V 4. OneCCto Sri. V Sai Kumar, Advocate [OPUC] 5. One CC to Sri. Satyanarayana Dhara, Advocate [OPUC] 6. One CC to M/S V Dyumani, Advocate [OPUC. 7. One CC to Sri Anup Koushik Karavadhi, Advocate [OPUC]. 8. THREE CD Copies AL HIGH COURT '3. DATED:25/11/2024 ORDER - ^ A ,,g 2 ii JAN 2025 . Current Section 1 WP.No.19122 of 2024 Co DISPOSING OF THE WP WITHOUT COSTS "