RATAN BEJ V. THE PRINCIPAL COMMISSIONER OF INCOME TAX

WPC/3589/2023

AI Insights

The case involves Ratan Bej, the petitioner, who challenged the notices and orders issued by the Income Tax Department regarding the reopening of his income tax assessment for the Assessment Year 2016-17. The petitioner argued that the proceedings were void ab initio as they were beyond the jurisdiction and not in accordance with the statutory provisions of the Income Tax Act, particularly Sections 148A, 148, 149, and 151. The respondents acknowledged that the petitioner's reply was not considered due to a technical issue, which led to a violation of the principles of natural justice. The court examined the procedural lapses and the substantive issues regarding the monetary limit for reopening assessments under Section 149(1)(b), concluding that the income in question did not exceed the threshold, thus barring the reopening of the assessment.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 759302 (HC-JHARKHAND)
• Appeal Type: Others
• Pronouncement Date: 24-01-2024
• Assessment Year: misc
• Other Referred Cases: GKN Driveshafts (India) Limited Vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: R N SAHAY; ANURAG VIJAY
• Assessee Lawyers: NITIN PASARI
• Keywords: Assessment proceedings; Income Tax; Jurisdiction; Monetary limit; Natural Justice; Technical Problem
• Section: 148; 154; 26; 149; 151; 148A

Judgement Text

"1 IN THE HIGH COURT OF JHARKHAND AT RANCHI W.P.(T) No. 3589 of 2023 Ratan Bej ..… Petitioner Versus 1. The Principal Commissioner of Income Tax, Ranchi, Jharkhand 2. The Income Tax Officer, Ward 1(1), Jamshedpur, East Singhbhum, Jharkhand. .....Respondents --------- CORAM: Hon’ble Mr. Justice Rongon Mukhopadhyay Hon’ble Mr. Justice Deepak Roshan --------- For the Petitioner : Mr. Nitin Pasari, Adv. For the Respondents : Mr. R.N. Sahay, Sr. S.C. Mr. Anurag Vijay, A.C. to Sr. S.C. --------- CAV on :-24.11.2023 Pronounced on: 24/01/2024 Per Deepak Roshan, J. The instant application has been preferred for the following reliefs:- (i) For issuance of an appropriate writ, order or direction, quashing and declaring the entire assessment proceedings to be void ab initio, since the very foundation of reopening of the assessment in the case in hand is completely ruled out and the proceedings are beyond jurisdiction in terms of Section 148A read with Section 148, Section 149 and Section 151 of the Income Tax Act, 1961. (ii) For issuance of an appropriate writ, order or direction for quashing and setting aside the Notice issued under Section 148A(a) of the Act dated 09.02.2023 bearing DIN ITBA/AST/F/17/2022-23/1049577609 (1) annexed hereto at Annexure-2 and Notice under Section 148A(b) of the Act dated 21.03.2023 bearing DIN ITBA / AST / F / 148A (SCN) / 2022- 23/1051031490(1) annexed hereto at Annexure-3, respectively for being beyond jurisdiction. (iii) For issuance of an appropriate writ, order or direction for quashing and setting aside the Order passed by Respondent No. 2 purportedly under Section 148A(d) dated 30.03.2023 bearing DIN ITBA/AST/F/148A/2022-23/1051688162(1) annexed hereto at Annexure-6 and Notice dated 31.03.2023 bearing DIN ITBA / AST / S / 148_1/2022-23/1051720987(1) issued under 2 Section 148 of the Income Tax Act, 1961, annexed hereto at Annexure-7. 2. The brief facts of the case as disclosed in the instant writ application is that the Petitioner is an individual registered with the Income Tax Department vide PAN-BXSPB4753K. Although the Petitioner has got itself registered with the Income Tax Department, but has never filed Returns of Income, since the total income of the Petitioner has never exceeded the threshold limit as prescribed under law. On 30.01.2016 M/s. Santosh Enterprises approached the Petitioner and his brother namely Deepak Bej for purchase of a property jointly owned by them, to which they agreed on and a sale deed was executed for a consideration amount of Rs. 65,36,000/- and TDS against the same was deposited under the PAN of the Petitioner by the Purchaser. 3. On 09.02.2023, Petitioner received a Notice under Section 148A(a) of the Income Tax Act, 1961 (hereinafter to be referred as the Act) bearing DIN ITBA/AST/F/17/2022-23/1049577609(1) wherein the Petitioner had been called upon to furnish information enumerated therein on or before 17.02.2023 on the ground that an enquiry has been initiated against the Petitioner on the basis of information available with them. The Petitioner yet again received another notice dated 21.03.2023 bearing DIN ITBA/ AST/ F/148A(SCN) /2022- 23/ 1051031490(1) under Section 148A(b) of the Act; wherein the Petitioner was required to show cause on or before 28.03.2023, as to why notice under Section 148 of the Act should not be issued. On 28.03.2023, the Petitioner after taking legal advice furnished a detailed reply cum objection wherein the Petitioner stated that the 3 property in question before sale belonged to him and his own brother having equal share in the property and under any eventuality the entire amount of sale consideration cannot be said to have escaped assessment in the hands of the Petitioner alone, as also, the proceedings in terms of Section 149 of the Act is time barred, inasmuch as, the Petitioner’s share in the sale consideration is only Rs. 32,68,000/- viz., 50% of Rs. 65,36,000/- which is less than Rs. 50 lakhs. On 30.03.2023 and 31.03.2023, Petitioner received an Order bearing DIN ITBA/AST/F/148A/2022- 23/1051688162(1) passed under Section 148A(d) of the Act, wherein without considering and disposing off the Reply cum objection filed/raised by the Petitioner, reopening of proceeding under Section 148 has been ordered. Consequently, notice under Section 148 of the Act bearing DIN ITBA/ AST/ S/ 148_1/ 2022-23/ 1051720987(1) has also been issued. On 26.05.2023, Petitioner reiterating the submissions made by him while furnishing reply to the Show Cause Notice filed an application under Section 154 of the Act seeking rectification of the Order dated 30.03.2023 passed under Section 148A(d) of the Act. However, no action has been taken in this regard. Hence, this writ application has been filed. 4. A counter affidavit has been filed in the instant case wherein the respondent has accepted that the reply filed by the Petitioner has not been considered during the proceeding under Section 148A of the Act. It has been further contended that the Petitioner can now make a categorical reply during the assessment proceedings and the same shall be considered by the Assessing Officer. Moreover, Partition deed has not been made available to 4 prove equal share between the Petitioner and his brother, Deepak Bej. It has been further, accepted that the contention of the Petitioner is right and after looking into the entire dispute and documents as appended to the writ petition, it is admitted by the Answering Deponent that only one half of the consideration is chargeable to tax in the instant case viz., 32,68,000/- which is less than the monetary limit of Rs, 50,00,000/- as prescribed in Section 149(1)(b) of the Act and the said fact was not available by the Assessing Officer. For brevity, relevant portion of Para-13 & 13(W) is extracted herein below: \" 13..........the petitioner had e-filed a reply on 28.03.2023, the reply could not be transmitted till passing of the order. It appears that the reply might not have been transmitted due to technical problem. Therefore, his reply could not be considered during the proceeding under section 148A of the Act…... 13(w). That the petitioner is correct to state that his case falls under section 149(1)(b) of the Act and his case of income escaping assessment exceeds Rs. 50 lakhs is mandatory for issue of notice under section 148 of the Act. Perusal of the sale deed which is subsequently accessible shows that the immovable property was developed upon the petitioner and his brother Sri Deepak Bej after the death of their father. Accordingly, only one half of the sale consideration is chargeable to tax in the petitioner’s case. Thus, income chargeable to tax in the petitioner’s case is seen to be Rs. 32,68,000/which is less than the monetary limit of Rs. 50,00,000/prescribed limit under section 149(1)(b) of the Act. However, the said fact that the petitioner’s share was only 50% in the entire sale consideration was not available with the Assessing Officer due to the 5 circumstances mentioned in above paras.\" 5. Mr. Nitin Pasari, learned counsel for the petitioner submits that the Respondent accepted that the reply of the Petitioner was not considered for whatsoever reason, renders the entire proceedings devoid of Principles of Natural Justice, hence, bad in law. The contention of the answering deponent is that the petitioner can now make a categorical reply during the assessment proceedings and the same shall be considered by the Assessing Officer is disputed, inasmuch as, the same shall entirely negate the legislative intent of insertion of Section 148A into the Act of 1961, and adopting such a method as proposed by the answering deponent shall cause unnecessary harassment to the Petitioner. Further, there is no requirement of partition deed, inasmuch as, a perusal of the title deed itself would transpire that the Petitioner and his brother upon demise of their father became joint owners of the property under consideration with respective share of 50% and both being joint vendors in the said transaction are entitled to equal share of the consideration amount and as such no bank account statement is required to be produced for verification etc. Moreover, Section 26 of the Income Tax Act, 1961, provides that where a property is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not be assessed as an Association of Persons, but the share of each person in income of the property shall be included in his total income. Since accepted the contention of the Petitioner that the consideration chargeable to tax in the instant case is Rs. 32,68,000/- which is less than the monetary 6 limit of Rs, 50,00,000/- as prescribed in Section 149(1)(b) of the Act, hence, in light of such admission, it can be construed that the assessment proceeding initiated by the Department is barred by limitation, as also, is beyond jurisdiction. 6. In crux the submission made by the learned counsel for the petitioner can be summarized as under:- (a) The action of the assessing authority of not considering the reply-cum-objection filed by the petitioner is in sheer violation of principles of natural justice and rule of fairness and the revenue ought to have disposed of the objection raised by the petitioner in the light given by the judgment rendered by the Hon’ble Apex Court in the case of GKN Driveshafts (India) Limited Vs. ITO. (b) The action of the Respondents of initiating and concluding the enquiry proceedings under Section 148A is beyond jurisdiction and time barred in terms of Section 149 of the Income Tax Act, 1961. 7. Mr. R.N. Sahay & Mr. Anurag Vijay, learned counsels for the revenue submit that as per the Risk Management Strategy (RMS) formulated by the Central Board of Direct Taxes, following information in the case of the petitioner pertaining to the Assessment Year 2016-17 was made available to the Assessing Officer through the online portal named as \"Insight Portal\": (i) Transfer of immovable property other than agricultural land valued at Rs. 65,36,000/-. (ii) TDS statement- Receipt on transfer of certain immovable property Rs. 65,36,000/-. Notwithstanding undertaking such big quantum transaction, the petitioner did not disclose transaction to the department as he had not furnished any return of said amount for the relevant Assessment 7 Year 2016-17. Further since the petitioner's case pertains to the Assessment Year 2016-17, specified authority for the purpose of Section 148A, 148 and 149 of the Income- tax Act, 1961 is the Pr. Chief Commissioner of Income- tax (Bihar & Jharkhand), Patna (hereinafter referred to as \"the specified authority\"). In light of the said information, a proposal seeking approval of the specified authority was submitted on 06.01.2023 through the departmental online application named as \"Income Tax Business Application (ITBA). The proposal to conduct inquiry in the petitioner's case was granted by the specified authority on 06.02.2023 following which an inquiry letter in terms of the provision of Section 148A(a) of the Act was issued to the petitioner on 09.02.2023 requiring the petitioner to furnish reply on or before 17.02.2023. He further submits that the petitioner did not furnish any reply within the specified date. However, the Assessing Officer waited for the reply till 20.03.2023. But no reply was received. In the light of the period of limitation involved in this case, a show cause notice under section 148A(b) of the Act was issued to the petitioner through online proceeding on 21.03.2023 requiring him to furnish reply on or before 28.03.2023. It was found that the petitioner has not furnished any reply and since neither ITR for the relevant Assessment Year was filed by the petitioner nor was any reply received by the Assessing Officer, the information available on record suggested that the sale consideration of Rs.65,36,000/- had escaped assessment for the A.Y 2016-17 as per provisions of section 149(1) (b) of the Income Tax Act, 1961. Therefore on 29.03.2023, a draft order under section 148A (d) of the Act was submitted to the specified 8 authority seeking his approval for passing order under section 148A (d) of the Act and for issuance of notice under section 148 of the Act. Further the approval was granted on 30.03.2023 following which an order under section 148A (d) of the Act was passed and notice under section 148 of the Act was issued. However, the counsel for the Revenue could not dispute the fact that the petitioner had e-filed a reply on 28.03.2023, but their contention is that the reply could not be transmitted till passing of the order. Learned counsel accepted that the reply might not have been transmitted due to technical problem. Therefore, his reply could not be considered during the proceeding under section 148A of the Act. 8. Having heard learned counsel for the parties and after going through the documents annexed with the respective affidavits and the averments made therein, it appears that mainly two issues are involved in this case. So far as first issue is concerned; in terms of Section 148A(c) of the Income Tax Act, 1961, the Assessing Officer is mandatorily required to consider the reply/objections furnished by the Assessee. Non consideration of reply or objection furnished by the Assessee not only amounts to violation of principles of natural justice but is also contravention of mandatory modalities which are to be followed during the course of enquiry proceedings under Section 148A of the Act. In the instant case, the Respondents have not disputed the fact that the Petitioner has not filed any reply, but have categorically accepted the fact in Para- 13 at Page-6, Para-13 (G) at Page-12, Para-13 (L) at Page-17- 18, Para-13 (O), 13(P) at Page-19 of the Counter Affidavit 9 that the reply-cum-objection furnished by the Petitioner has not been considered by the concerned Respondent. It is rather immaterial for whatever reason the reply-cum- objection furnished by the Petitioner has not been considered. The Assessing Officer ought to have considered the objections raised by the Petitioner and should have disposed the same in terms of judgment rendered by the Hon’ble Apex Court in the matter of GKN Driveshafts (India) Limited v. ITO wherein the Hon’ble Apex Court has laid down an elaborate procedure as to the manner of dealing with objections raised against a notice under Section-148 of the Act. The Hon’ble Supreme Court in the said judgment clarified that when a notice under section- 148 of the Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The following points may be noted with respect to supply of copy of reasons: (i) The Assessing Officer is bound to furnish reasons within a reasonable time; (ii) On receipt of reason, the noticee is entitled to file objections to issuance of notice; and (iii) The Assessing Officer is bound to dispose of the same by passing a speaking order. 9. At this stage, it would be pertinent to indicate that Section 148 and 148A which have been introduced by way of the Finance Act, 2021, has been codified following the judgment rendered by the Apex Court in the matter of GKN Driveshafts (India) Limited (supra). The provisions mandate that, before making any assessment under Section 147, the Assessing Officer must serve a notice to the Assessee requiring him to file his return of income within specified time and before such notice, the Assessing Officer shall record his reasons for the same. 10 While the earlier provision required the Assessing Officer to have reason to believe that there is escapement of income, the new provision required any information as specified under Explanation 1 to Section 148 to be present for there to be a reopening of the case. Furthermore, Section 148A which was inserted by the Finance Act, 2021 reiterates the procedure to be followed by the Assessment Officer upon receiving such information, including conducting any inquiry regarding the information received, providing an opportunity of being heard to the Assessee through serving of notice to show cause within the prescribed time in the notice (which must not be less than 7 days and not more than 30 days on the date of serving the notice or the time period till which time extension was received by the Assessee), considering the reply given by the assessee and deciding on the basis of the material that is present, including the reply, about whether the case is fit for passing a notice under Section 148 through passing an order within 1 month from the reply. 10. So far as second issue is concerned; apart from the codification of Sections 148 and 148A, Section 149 was further modified by the Finance Act, 2021 to the effect that any case can be reopened within three years from the time of end of relevant assessment year as under clause (a) of Section 149(1), if there is information with the Assessing Officer that suggests that there is escapement of income as provided under Explanation 1 to Section 148, and upto 10 years as provided in Clause (b) of Section 149(1) in certain exceptional cases, defined as circumstances where income chargeable to tax, within the meaning of “asset” that has escaped assessment amounts to or is likely to amount to fifty lakh rupees 11 (50,00,000/-) or more in that year. In the instant case, the property under consideration has been obtained by the Petitioner and his brother by the law of inheritance and succession, that too, after the demise of their father. A perusal of the deed (Annexure-1) would transpire that the Petitioner and his brother upon demise of their father became joint owners of the property under consideration with respective share of 50% each and both being joint vendors in the said transaction are entitled to equal share of the consideration amount, viz., 32,68,000/- each. Since, the income escaping assessment is less than 50 lakhs, Section 149(1)(b) of the Act could not have been invoked. The said contention of the Petitioner has also been backed up by the Respondents in Para-13(W) of the Counter Affidavit (quoted herein above) which is a specific admission by the Respondents that only one half of the consideration is chargeable to tax in the instant case i.e., 32,68,000/- which is certainly less than the monetary limit of Rs, 50,00,000/- as prescribed in Section 149(1)(b) of the Act and the said fact was not available by the Assessing Officer. 11. At this stage, it is also profitable to refer Section 26 of the Income Tax Act, 1961 which provides that where a property is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not be assessed as an Association of Persons, but the share of each person in income of the property shall be included in his total income. For brevity, Section 26 of the Act, is quoted hereinbelow for ready reference: “Property owned by co-owners 26. Where property consisting of buildings or buildings 12 and lands appurtenant thereto is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not in respect of such property be assessed as an association of persons, but the share of each such person in the income from the property as computed in accordance with sections 22 to 25 shall be included in his total income. Explanation.- For the purposes of this section, in applying the provisions of sub-section (2) of section 23 for computing the share of each person as is referred to in this section, such share shall be computed, as if each such person is individually entitled to the relief provided in that sub-section.” 12. Before parting, it is necessary to observe that in the instant case the deed (Annexure-1) would transpire that the Petitioner and his brother upon demise of their father became joint owners of the property under consideration with respective share of 50% each and both being joint vendors in the said transaction are entitled to equal share of the consideration amount, viz., 32,68,000/- each; since the income escaping assessment is less than 50 lakhs, Section 149(1)(b) of the Act could not have been invoked. Accordingly, one of the contentions of the Revenue that the petitioner can very well explain the facts in the Assessment proceedings and the writ application is not maintainable; does not appear to be impressive as we are of the view that directing the petitioner to explain the facts before the Assessing Officer will be a futile exercise by the Assessee in view of the specific provision enshrined under Section 149(1)(b) of the Act since the income escaping assessment is less than 50 lakhs, and Section 149(1)(b) of the Act could not have been invoked. 13. Having regard to the aforesaid discussion, it can be construed that the assessment proceeding initiated by the Department is barred by limitation, as also, is beyond jurisdiction. Hence, the entire enquiry 13 proceeding along with impugned order under section 148A(d) of the Act along with Notice issued under Section 148 of the Act deserves to be quashed. Consequently, the Notices issued under Section 148A(a) of the Act dated 09.02.2023 bearing DIN ITBA/AST/F/17/2022-23/1049577609(1) (Annexure-2) and Notice under Section 148A(b) of the Act dated 21.03.2023 bearing DIN ITBA / AST / F / 148A (SCN) / 2022-23/1051031490(1) (Annexure-3) and the Order passed by Respondent No. 2 purportedly under Section 148A(d) dated 30.03.2023 bearing DIN ITBA/ AST/ F/ 148A/2022-23/1051688162(1) (Annexure-6) and Notice dated 31.03.2023 bearing DIN ITBA / AST / S / 148_1/ 2022-23/1051720987(1) issued under Section 148 of the Income Tax Act, 1961, (Annexure-7), are hereby, quashed and set aside. 14. As a result, the instant application stands allowed. Pending I.A., if any, is also closed. (Rongon Mukhopadhyay, J.) (Deepak Roshan, J.) Fahim/- AFR- "