M/S Preethi Himachal & Co. V. Union of India through the Secretary, Department of Revenue and Income Tax Officer, Income Tax Department, Parwanoo and National Faceless Assessment Centre, Income Tax Department, New Delhi and Commissioner of Income Tax (Appeals), National Faceless Assessment Centre, New Delhi and Principal Commissioner of Income Tax, Shimla

CWP/2438/2022

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The case involves M/S Preethi Himachal & Co., which filed a writ petition against the reassessment order and notices dated 31.3.2022 issued under Section 147 of the Income Tax Act concerning the assessment year 2017-18. The petitioner contested that the reassessment was barred as the income was already subject to an appeal regarding the original assessment order dated 17.12.2019, which added a significant amount to the petitioner's income, reclassifying investments as 'stock-in-trade' rather than 'capital assets'. The court had previously directed the Income Tax Officer to decide on the preliminary issue raised by the petitioner, but the reassessment order was passed without addressing this preliminary issue. The court did not entertain the writ petition directly against the reassessment order but allowed the petitioner to appeal against it.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 693834 (HC-HIMACHAL_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 22-04-2022
• Assessment Year: misc
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: BALRAM SHARMA; VINAY KUTHIALA; DIWAN NEGI
• Assessee Lawyers: AMAR SINGH; JYOTIRMAY BHATT
• Keywords: Appeal; Assessment Order; Capital Gains; Income Tax; Reassessment; Stock-in-Trade
• Section: 147

Judgement Text

"IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA ON THE 22ND DAY OF APRIL 2022 BEFORE HON'BLE MR. JUSTICE MOHAMMAD RAFIQ, CHIEF JUSTICE & HON'BLE MR. JUSTICE SANDEEP SHARMA CIVIL WRIT PETITION NO. 2438 OF 2022 Between:- M/S PREETHI HIMAACHAL & CO. 10/5, ROYAL ENCLAVE, BESANT NAGAR, CHENNAI, TAMIL NADU-600 020, THROUGH SH. UMA SHANKAR. K, AUTHORIZED SIGNATORY .. PETITIONER (BY MR. AMAR PRATAP SINGH AND MR. JYOTIRMAY BHATT, ADVOCATES) AND 1. UNION OF INDIA THROUGH THE SECRETARY, DEPARTMENT OF REVENUE, NORTH BLOCK, NEW DELHI-110 001 2. INCOME TAX OFFICER INCOME TAX DEPARTMENT, PARWANOO, HIMACHAL PRADESH-173220 3. NATIONAL FACELESS ASSESSMENT CENTRE INCOME TAX DEPARTMENT, NEW DELHI- 110 002 4. COMMISSIONER OF INCOME TAX (APPEALS) NATIONAL FACELESS ASSESSMENT CENTRE, NEW DELHI-110 002 5. PRINCIPAL COMMISSIONER OF INCOME TAX, SHIMLA, RAILWAY BOARD BUILDING, THE MALL, SHIMLA, 2 HIMACHAL PRADESH -171 003. RESPONDENTS (MR. BALRAM SHARMA, ASSISTANT SOLICITOR GENERAL OF INDIA, FOR R-1) (MR. VINAY KUTHIALA, SENIOR ADVOCATE WITH MR. DIWAN NEGI, ADVOCATE, FOR R-2 TO R-5) This petition coming on for orders this day, Hon'ble Mr. Justice Mohammad Rafiq, passed the following: O R D E R This writ petition has been filed against the Assessment Order and notices dated 31.3.2022 (Annexure P-1). The petitioner had earlier approached this Court against the assessment order passed on the basis of notice issued to the petitioner under Section 147 of the Income Tax Act, in respect of earlier income tax assessment for the assessment year 2017-18. Petitioner in the aforesaid writ petition, challenging the aforesaid notice, contended that in the original assessment order dated 17.12.2019, the jurisdictional Assessing Officer has made an addition of Rs. 40,13,89,726/- to the total income of the petitioner, primarily on the ground that the investments held by the petitioner are to be treated as “stock-in-trade” and not as “capital assets” and that the petitioner should have computed the income tax liability under the head, “profits and gains from business or profession” and not under the head, “capital gains”. It was also the case of the petitioner that the assessee being aggrieved by the aforesaid assessment order dated 17.12.2019, filed an appeal before Commissioner Income Tax (Appeals), which is pending adjudication. 3 Fresh notice issued under Section 147 of the Act is barred by virtue of provision contained in third proviso to Section 147 of the Income Tax Act, which inter alia provides that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. 2. Argument of the petitioner was that since the income, which was sought to be reassessed, was already subject matter of the appeal, as such, notice for reassessment could not have been issued in view of the bar contained under third proviso to Section 147 of the Act. This Court disposed of the writ petition directing that the jurisdictional/preliminary issue raised by the petitioner in its reply filed to the impugned notice, shall be decided first by respondent No.2/ Income Tax Officer and in case decision goes against the petitioner, it shall be granted 15 days’ time to avail appropriate remedy. 3. Learned Counsel appearing for the petitioner submits that he submitted the reply to the notices online on account of the system of the respondents of assessment. It was decided by respondent No.3, National Faceless Assessment Centre, Income Tax Department, Delhi and the order of reassessment was passed rather than deciding the preliminary issue. In answer to the query of the court, petitioner submits that he did not submit a copy of order dated 2.3.2022 passed by this Court in CWP No. 1104 of 2022 and also the reply to the notices before Income Tax Officer, Parwanoo. Since the order of this Court merely stated that the reply to the objections raised by the petitioner shall be first decided by 4 respondent No.2-Income Tax Officer, and the word “Parwanoo” was missing, he could not submit the same before Income Tax Officer, Parwanoo. 4. Perusal of the cause title of the earlier writ petition filed by the petitioner clearly indicates that the “Income Tax Officer, Parwanoo- 173220” was already made a party-respondent No.2 and therefore, even if the word, “Parwanoo” was omitted from being mentioned in the operative part of the order of this Court, it cannot be said that the petitioner was, in any manner, misled. 5. Learned counsel for the respondents also submits that even though they sent a copy of above order to Income Tax Officer Parwanoo, but since it was received late, by that time, the assessment order had already been passed. 6. Having regard to the fact that the original assessment order passed by the respondents is subject matter of the appeal pending before Commissioner Income Tax (Appeals), National Faceless Assessment Centre, Delhi in appeal bearing No. CIT A SHIMLA/10395/2019-20 and now because re-assessment order has been passed on 31.3.2022 on the basis of notice under Section 147 of the Act, we do not deem it appropriate to directly entertain this writ petition against such order. We, however, set the petitioner at liberty to file an appeal against this order, as well, alongwith an application seeking appropriate interim relief, as the appellate authority may deem fit and persuaded to grant. However considering that a huge demand is involved in the earlier appeal, apart from demand in the impugned reassessment order, we deem it 5 appropriate to direct the Commissioner Income Tax (Appeals), National Faceless Assessment Centre, Delhi to dispose of the appeals within three months from the date of production of a copy of this order, subject to the petitioner filing appeal against reassessment order, within a period of two weeks. The petition stands disposed of in the afore terms. All pending applications also stand disposed of. (Mohammad Rafiq) Chief Justice (Sandeep Sharma) Judge April 22, 2022 (Vikrant/Shankar) "