ARUP BAGUI V. UNION OF INDIA AND ORS.

WPA/726/2023

AI Insights

The case involves Shri Arup Bagui, the petitioner, who challenged an order and subsequent notice issued by the Income Tax Department under sections 148A(d) and 148 of the Income Tax Act, 1961, respectively. The dispute centered on the assessment year 2019-20, where the petitioner had claimed deductions for donations, which were initially accepted. However, subsequent notices alleged undisclosed income, leading to the challenge. The petitioner argued that the notices were issued without proper procedure, including inadequate time for response and lack of necessary documents. The court, after examining the procedural lapses, ruled in favor of the petitioner, setting aside the notices and the order.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 685141 (HC-PORT BLAIR)
• Appeal Type: Others
• Pronouncement Date: 22-09-2023
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Assessee Lawyers: NIMISHA AGARWAL
• Keywords: Assessment Year 2019-20; Income Tax; Legal Procedure; Reassessment; Show cause notice; Undisclosed income
• Section: 148; 143(1); 139(1); 148A(b); 148A; 148 A (d)

Judgement Text

"1 IN THE HIGH COURT AT CALCUTTA [CIRCUIT BENCH AT PORT BLAIR] ******** WPA/726/2023 Shri Arup Bagui ….. Petitioner Versus Union of India and Ors. ….. Respondents Mrs. Nimisha Agarwal ... for the Petitioner (Through Virtual Mode) September 22, 2023 (Manoj) (item No. 6) The writ petitioner has challenged an order passed by the Respondent No. 2 dated April 19, 2023, under section 148 A(d) of the Income Tax Act, 1961. Consequent to the issuance of the said order dated April 19, 2023, the respondents have issued to the writ petitioner a notice under section 148 of the said act, dated same, that is April 19, 2023, which is also under challenge in the instant writ petition. Notice has been served upon the respondents and the affidavit of service has been filed in Court. However, in spite of due and completed service no one is appearing on behalf of the respondents, when the matter is called on. It is worth noting that the matter has been pending in the list since September 18, 2023 and has been called on each day of working of this Court. However, the respondents have never turned up on any occasion, including today. Hence, the 2 matter is taken up to date for adjudication and order in absence of the respondents. The issue here relates with the Assessment Year 2019 – 20. According to the writ petitioner, he has filed the return of income for the said here on August 29, 2019, that is within the time limit provided under section 139(1) of the Income tax Act. A deduction to the tune of Rs. 4,00,000/- and Rs.48,685/- respectively were claimed on account of donation made towards two organizations. The said return was accepted and the writ petitioner was intimated vide dated April 25, 2020, under section 143(1) of the said Act. An amount of Rs.7430/-was determined to be refunded to the writ petitioner. Subsequently on March 28, 2023, the writ petitioner received a corrigendum to the show cause notice dated same that is March 28, 2023, under section 148A(b) of the Income Tax Act, 1961. From the corrigendum it appeared that the writ petitioner was given opportunity to reply to the said show cause notice within April 18, 2023. Petitioner’s specific grievances that though he has received the corrigendum of the notice via email on March 20, 2023, he has never received the original show cause notice, before receipt of the said corrigendum of the same. He has said that it is only on April 13, 2023 at 4:40 AM he has received the impugned show cause notice under section 148A(b) dated March 28, 2023, via email. Therefore, the petitioner 3 says that the impugned show cause notice is ante dated and was issued only on April 13, 2023, though was purportedly endorsed with the date prior to the same that is March 28, 2023. The petitioner is also aggrieved with the fact that the impugned show cause notice as above has not been supplied with the relevant documents upon which the respondents have founded allegations against him. As such, he says that the impugned notification is only baseless, vague and unfounded. The writ petitioner submitted two consecutive replies to the impugned show cause notice and the corresponding corrigendum thereof, on March 28, 2023 and April 18, 2023 respectively, by way of uploading the same in the official portal of the department. However, allegedly, the respondent authority has passed the impugned order dated April 19, 2023, without considering the writ petitioners replies. Ms. Nimisha Agarwal has pointed out to various grounds on which the writ petitioner has filed the instant case. Firstly she has stated that the show cause notice as impugned in this case dated April 19, 2023 is invalid being barred by limitation as the same ought to have been issued within such time for which would have enabled the respondent No.2, to issue a notice under section 148 of the said Act within the prescribed time limit under section 4 149(1)(a) of the Act, considering the time lines prescribed under section 148A and 149 (proviso) of the same, unless extended. She has further stated that her client was intimated about the show cause notice dated March 28, 2023, only on April 13, 2023. In the same his client was directed to submit reply or not before April 18, 2023 that is, within a gap of 5 days. According to Ms Nimisha Agarwal this is in violation of the statutory provision in so far as the mandatory minimum time period of 7 days is required to be given to a person from whom reply is sought for a show cause notice under section148A(b). She has emphasized that not allowing his client minimum period of time to reply to a show cause notice issued under section 148A(b) of the said Act has rendered such a show cause notice null and void and vitiated. Ms. Nimisha Agarwal has again argued that the writ petitioner was not supplied with the documents on the basis of which the specific allegations were brought in by the respondents against the writ petitioner. This has jeopardized the petitioner’s right to effectively rebut the allegations made against him. According to the writ petitioner, the purported action of the respondents in not supplying him the relevant documents along with the show cause notice has not only desirable to him to defend himself but also rendered the entire proceeding to a mere formality 5 and thus invalid and not maintainable. Thus no material was available to demonstrate that a chargeable income has escaped assessment in the hands of the petitioner and the impugned notice of show cause and the subsequent order are thus baseless. It has also been contended that non- consideration of the reply submitted by the writ petitioner of the show cause notice, while passing an order under section 148A(d) of the Act, has rendered the impugned order as invalid in the eye of law. Section 148A has been introduced in the Act, in 2021. If the Income Tax Officer has information of undisclosed income for a specific assessment year, the officer must afford the tax payer an opportunity to provide an explanation, before issuance of notice under Section 148 of the said Act. Thus, under the newly promulgated Section 148A, the tax payer has the right to be heard by the Officer. The Assessing Officer must issue a notice to the tax payer under Section 148A (b) of the Income Tax Act, providing information and adverse materials suggesting that income has escaped assessment. The tax payer can respond with their own material and evidence. The Assessing Officer must allow the tax payer atleast seven days time, as per the statute to provide their explanation. After considering the tax payer’s response, the Income Tax Officer will decide whether to issue a notice for reassessment or not. If the Officer decides to reopen the case they must provide a copy 6 of the order and the notice under Section 148 of the Act, to the tax payer. It is incumbent for the Assessing Officer, under the new scheme of the statute that he mandatorily provides the tax payer with all the materials and information relied upon, along with the notice under Section 148A of the Act. There must be supporting material, that the income has escaped assessment and only some assertions to that effect, are not enough to validate the issuance of a notice under Section 148A of the said Act. It is also incumbent for the Assessing Officer to mandatorily consider the tax payer’s reply to the notice, referred to in clause (b) of Section 148 A of the said Act. Now the law is settled to the effect that any notice issued under Section 148, without following the procedure laid down under Section 148A (i.e., without giving an opportunity to be heard) would be invalid and against the provisions of the Income Tax Act. The Courts have consistently emphasized that the procedure outlined in Section 148A must be strictly followed. The uncontroverted facts revealed in the present case is that the writ petitioner was, at the first instance, not even issued with the show cause notice under Section 148A (b) of the Act. He was first issued with a corrigendum to the original show cause notice i.e. on March 28, 2023. Subsequently, the writ petitioner was served with the original notice as above via email, on April 13, 2023 at 4.40 7 a.m., though the document which was served to him contended a date of March 28, 2023. The document did not enclose any other material upon which the imputation was based. Furthermore, the writ petitioner was provided time until April 18, 2023 to submit a reply to the said show cause notice. Again, the reply submitted by the writ petitioner has not been considered by the respondent authorities and a notice under Section 148 of the said Act has been issued by them. The facts of the present case clearly go to show that the mandatory provisions under Section 148A of the Income Tax Act have not been followed by the respondent authorities in the present case. Firstly, the minimum span of time to be allowed to reply to the show cause notice, of seven days, cannot be said to have been allowed to the writ petitioner in view of the fact that he was served with the show cause notice only on April 13, 2023 while he was required to reply to the same before or on April 18, 2023 i.e. much less a time period of minimum seven days, as provided under the law. Secondly, the writ petitioner has not been provided with the relevant documents upon which the imputations against him are founded. Further, it can be seen that the respondent authorities have purportedly issued an order under Section 148 of the Income Tax Act, without considering writ petitioner’s objections to the said show cause notice. This is also untenable under the law. 8 All these as discussed above, have rendered the notice issued to the writ petitioner, under Section 148A of the Income Tax Act as illegal and nugatory. For the reasons as above the present writ petition should succeed. WPA No. WPA/726/2023 is allowed. The impugned notice under section 148A(b) of the Act bearing DIN no. ITBA/AST/F/148A(SCN)/2022-23/ 1051523934(1) dated March 28, 2023, issued by Respondent No.2 herein on April 13, 2023 along with its corrigendum bearing DIN No. ITBA/COM/F/17/2022- 23/1051525241(1) dated March 28, 2023 issued by Respondent No.2 herein for the AY 2019-20, is set aside. The writ petition is disposed of along with pending applications if any, however, without any order as to costs. Urgent certified photocopy of this order, if applied for, be supplied to the parties expeditiously in compliance of usual legal formalities. (Rai Chattopadhyay, J.) "