M/s Satguru Infra Projects V. Assistant Commissioner of Income Tax, Central Circle-I, Raipur

WPT/38/2022

AI Insights

The case involves M/s Satguru Infra Projects, a partnership firm, which challenged the notice issued by the Assistant Commissioner of Income Tax, Central Circle-I, Raipur, under Section 148 of the Income Tax Act, 1961, for the assessment year 2014-15. The petitioner had previously disclosed the purchase of agricultural land in Deori, which was assessed and found to be in order under Section 143(3) of the Act. The notice under Section 148 was issued after more than four years, alleging non-deduction of TDS under Section 194-IA for the property transaction. The petitioner argued that the land was agricultural and located beyond two kilometers from the municipality, thus not falling under the purview of Section 194-IA. The respondent contended that the land was a capital asset and the failure to deduct TDS resulted in revenue loss. The court, after examining the definitions and provisions cited, concluded that the notice was improperly issued as the land did not meet the criteria for non-agricultural land under Section 194-IA.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 799718 (HC-CHHATTISGARH)
• Appeal Type: Others
• Pronouncement Date: 25-03-2022
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: AMIT CHAUDHARY; AJAY KUMRANI
• Assessee Lawyers: SUNNY AGRAWAL
• Keywords: Agricultural Land; Assessment Year 2014-15; Income Tax Act; Notice under section 148; TDS non-deduction
• Section: 147; 148; 143(3); 142(1); 2(14); 194-IA

Judgement Text

"1 NAFR HIGH COURT OF CHHATTISGARH, BILASPUR WPT No.38 of 2022 • M/s Satguru Infra Projects (A Partnership Firm), Kanker City Centre, Near Bus Stand Kanker (CG) through its Partner: Rajesh Kumar Devnani, S/o Late Shri Hariram Devnani, S/o Late Shri Hariram Devnani, aged about 47 years, R/o Amapara, Kanker, P.O. P.S., Tehsil & District Kanker. ---- Petitioner Versus • Assistant Commissioner of Income Tax, Central Circle-I, Raipur, District Raipur (CG). ---- Respondents For Petitioner : Mr. Sunny Agrawal, Advocate For Respondent : Mr. Amit Chaudhary, Advocate with Mr. Ajay Kumrani, Advocate Hon'ble Mr. Justice Parth Prateem Sahu Order on Board 25.3.2022 1. Aggrieved by action of respondent in issuing notice under Section 148 of the Income Tax Act, 1961 (for short 'the Act of 1961') with respect to assessment year 2014-15, petitioner has filed this petition seeking for following relief:- “10.1. That, the Hon'ble Court may kindly be pleased to call for the entire records pertaining to the present case. 10.2 That, the Hon'ble Court may kindly be pleased to quash the impugned notice dated 28.03.2021 (Annexure P/1) and, in lieu thereof quash/set aside the notice dated 04.12.2021 (Annexure P/2) & letter dated (10.01.2022 & 11.01.2022) (Annexure P/3) issued in furtherance of assessment proceedings initiated as against the petitioner. 10.3 That, the Hon'ble Court may kindly be 2 pleased to quash entire proceedings initiated in lieu of notice under Section 148 of the Act, 1961 for the assessment year 2014-15. 10.4. That, this Hon'ble Court may kindly be pleased to grant any other relief (s), which it may deemed fit and proper in the aforesaid facts and circumstances of the case.” 2. Mr. Sunny Agrawal, learned counsel for petitioner would submit that in return of assessment year 2014-15 petitioner has disclosed that on 25.1.2014 he has purchased agricultural land situated in village Deori worth Rs.1,10,07,000/-. Upon issuance of notice under Section 142 (1) of the Act of 1961 petitioner submitted explanation annexing relevant documents as required by the Department. Considering the documents submitted by petitioner along with explanation/reply to notice under Section 142 (1) of the Act of 1961, respondent passed assessment order under Section 143 (3) on 30.6.2016. The order under Section 143 (3) is passed after considering entire material and upon satisfaction of respondent. In Paragraph-3 of assessment order under Section 143 (3) of the Act of 1961, the officer has elaborately discussed the issue of purchase of 6.81 acre of agricultural land in village Deori (situated more than 2 kms away from municipality limits) by petitioner for Rs.1,17,87,000/-. Impugned notice under Section 148 of the Act of 1961 is issued on 28.3.2021 i.e. after lapse of more than four years. It is also contended that in the facts and circumstances of the case, the Assessing Officer has not recorded reasons as required under the provisions of Section 147 of the Act of 1961 that the income 3 chargeable to tax has escaped assessment by reason of the failure on the part of assessee to make a return under Section 139 or to disclose fully and truly all material facts necessary for his assessment. Petitioner has disclosed all material facts necessary for his assessment upon issuance of notice under Section 142 (1) and only thereafter petitioner assessment under Section 143 (3) has been ordered by the Assessing Officer after recording his satisfaction. Reasons assigned for issuance of notice is non-deduction of TDS as required under Section 194- IA of the Act of 1961 would not apply to the facts of present case. Section 194-IA applies to payment on transfer of certain immovable properties other than agricultural land. As per documents placed before the Assessing Officer as also recorded by him that land purchased is an agricultural land and located beyond two kilometer from municipal limits. In view of aforementioned facts of case, learned counsel for petitioner prays for quashment of notices dated 28.3.2021, 04.12.2021 and 10/11-01-2022. 3. Mr. Amit Choudhary, learned counsel for the respondent would submit that notice under Section 148 of the Act of 1961 has been issued within a period of 4 to 6 years. Petitioner has not deducted tax on the value of property purchase and shown, which is capital asset of petitioner. Non-deduction of TDS caused loss to the revenue to the tune of Rs.1,10,017/-, therefore, considering return submitted by petitioner, the Assessing Officer has recorded reasons in terms of Section 147 4 and only thereafter issued impugned notice which cannot be said to be illegal or arbitrary. He submits that in return it has been specifically pleaded that it is the Ariel distance of property to be considered, which is less than 2 kms from the village where property is situated. Land purchased by petitioner is not in cultivation, hence it does not fall within the definition of Section 2 (14) of the Act of 1961. Action taken against petitioner is in accordance with provisions of Section 161 of the Act of 1961. Petitioner has not deducted tax at source, as provided under Section 194-IA of the Act of 1961, hence this proceeding is initiated against petitioner. 4. I have heard learned counsel for parties and also perused documents placed along with writ petition. 5. Petitioner has placed on record assessment order dated 30.6.2016 passed under Section 143 (3) of the Act of 1961 for the assessment year 2014-15. In Paragraph-3 of assessment order the Assessing Officer has considered purchase of 6.81 acre of agricultural land for Rs.1,17,87,000/- and further recorded that it is situated in village Deori which is more than 2 kms away from municipality of Kanker. Section 2 (14) of the Act of 1961 defines ‘capital asset’ and Section 2 (14) (iii) deals with agricultural land in India, which reads as under:- “(iii) agricultural land in India, not being land situate - (a) xxxxx (b) in any area within the distance, measured aerially- 5 (I) not being more than two kilometres, from the local limits of any municipality or cantonment board referred to in item (a) which has a population of more than ten thousand but not exceeding one lakh; or (II) not being more than six kilometres, from the local limits of any municipality or cantonment board referred to in item (a) which has a population of more than one lakh but not exceeding ten lakh; or (III) not being more than eight kilometres, from the local limits of any municipality or cantonment board referred to in item (a) which has a population of more than ten lakh.” 6. Perusal of reasons recorded for issuance of notice under Section 148 of the Act of 1961 and reasoning recorded by the Assessing Officer, it is apparent that Assessing Officer has considered that petitioner assessee has capital asset as per Section 2 (14) of the Act of 1961 and considering the sale deed and case files, has arrived at a conclusion that TDS as required under Section 194IA of the Act of 1961 was not deducted by purchaser. No other reason has been recorded by the Assessing Officer. 7. From perusal of impugned notice, it is apparent that there is no mention in reasons recorded by Assessing Officer that land is not an agricultural land. Once it is considered by Assessing Officer in the proceeding under Section 143 (3) of the Act of 1961 that property/ asset purchased is an agricultural land and further recorded in the proceeding also to this effect. Recording of reasons, as envisaged under provisions of Section 147 of the 6 Act of 1961, is mandatory for Assessing Officer before issuing notice under Section 148 of the Act of 1961. In the facts and circumstances of the case, “due to failure on the part of the assessee to disclose fully and truly all material facts necessary, income chargeable to tax has escaped assessment”. When the land of petitioner recorded by Assessing Officer is agricultural land after satisfying his query, then in the facts of case, the provisions referred to in by Assessing Officer for recording reasons for issuance of notice under Section 148 of the Act of 1961 are not applicable to the facts of the case. Hence, there was no reason before the Assessing Officer to issue notice under Section 148 of the Act of 1961 to petitioner, as per requirement under Section 147 of the Act of 1961. 8. As provisions of Section 194-IA of the Act of 1961 was considered by Assessing Officer for issuance of notice under Section 148 of the Act of 1961 for not deducting TDS, therefore, I find it appropriate to extract relevant provisions of that section, which applies to land other than agricultural land, herein below for ready reference:- “194-IA. Payment on transfer of certain immovable property other than agricultural land.—(1) Any person, being a transferee, responsible for paying (other than the person referred to in section 194LA) to a resident transferor any sum by way of consideration for transfer of any immovable property (other than agricultural land), shall, at the time of credit of such sum to the account of the transferor or at the time of payment 7 of such sum in cash or by issue of a cheque or draft or by any other mode, whichever is earlier, deduct an amount equal to one per cent of such sum as income-tax thereon. (2) No deduction under sub-section (1) shall be made where the consideration for the transfer of an immovable property is less than fifty lakh rupees. (3) The provisions of section 203A shall not apply to a person required to deduct tax in accordance with the provisions of this section.” 9. From perusal of afore quoted provision it is clear that these provisions will be attracted upon transfer of certain immovable property other than agricultural land. As discussed in preceding paragraphs, the Assessing Officer upon submission of return by petitioner for the assessment year 2014-15 disclosing purchase of agricultural land, issued notice under Section 142 (1) of the Act of 1961. Petitioner submitted relevant documents to satisfy query made by Assessing Officer in the notice under Section 142 (1) of the Act of 1961. Thereafter assessment order under Section 143 (3) of the Act of 1961 was passed. The Assessing Officer in Paragraph-3 of the order under Section 143 (3) discussed about agricultural land purchased by petitioner measuring 6.81 acre situated in village Deori to be more than two kilometer away from limits of municipality of Kanker. In these circumstances, this Court is of the considered opinion that when provision of the Act of 1961, which is made basis for issuance of notice under Section 148 of the Act of 1961 itself is not attracted to the facts of present case, notice issued under Section 148 is not sustainable and it is liable to be quashed. 8 10. For the foregoing discussions, writ petition is allowed. Impugned notice, Annexure P-1, issued under Section 148 of the Act of 1961 and all consequent proceedings arising therefrom are hereby quashed. Sd/- (Parth Prateem Sahu) Judge Roshan/- "