Shri Balaji Iron and Steel Traders V. Assistant Commissioner of Income-tax, Circle-1 (1), Bhilai and Chief Commissioner of Income Tax, Central Revenue Building, Civil Lines, Raipur and Principal Commissioner of Income Tax, Office of Chief Commissioner of Income Tax, Central Revenue Building, Civil Lines, Raipur

WPT/211/2023

AI Insights

The case involves Shri Balaji Iron and Steel Traders, a partnership firm, which challenged the order and notice issued by the Income Tax authorities under Sections 148A(d) and 148 of the Income Tax Act, 1961, respectively, for the assessment year 2016-17. The petitioner argued that the order and notice were illegal, arbitrary, and without jurisdiction, claiming that no material was presented to suggest that income had escaped assessment. The respondents, however, provided evidence of bogus purchases amounting to Rs.89,86,164 from M/s Rajendra Ispat, Raipur, during the financial year 2015-16, which were part of a scheme of accommodation entries. The court examined the procedural adherence and substantive material presented by both parties and concluded that the notice and order were validly issued.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 816149 (HC-CHHATTISGARH)
• Appeal Type: Others
• Pronouncement Date: 12-09-2023
• Assessment Year: misc
• Other Referred Cases: Fena Pvt. Ltd. Vs. ACIT Circle 7-1 New Delhi & Anr., Swastik Wire Products Vs. Principal Commissioner of Income Tax and Ors., Somnath Dealtrade Private Limited Vs. Union of India & Ors., Gian Castings Private Limited Vs. Central Board of Direct Taxes and others, Anshul Jain Vs. Principal Commissioner of Income Tax and another, Barbrik Projects Ltd. Vs. Union of India and others
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: AJAY KUMRANI
• Assessee Lawyers: SMITI SHARMA
• Keywords: Bogus purchases; Escaped assessment; Notice under section 148; Order under section 148A(d)
• Section: 148; 133A; 149; 148A(b); 148A(d)

Judgement Text

"-1- NAFR HIGH COURT OF CHHATTISGARH, BILASPUR Writ Petition (T) No. 211 of 2023 Shri Balaji Iron and Steel Traders, a partnership firm duly registered under The Partnership Act, 1932 having its office 32 Malviya Nagar, Durg 491001, Chhattisgarh through one of its partners Parwin Somani, S/o Shri Vijayshanker Somani, aged about 48 years, Resident of 5B, Mohini Merlin, Jayshree Vihar, Pandri Tarai, Raipur (C.G.) ---- Petitioner Versus 1. Assistant Commissioner of Income-tax, Circle-1 (1), Bhilai, District Durg (C.G.) 2. Chief Commissioner of Income Tax, Central Revenue Building, Civil Lines, Raipur, District Raipur (C.G.) 3. Principal Commissioner of Income Tax Office of Chief Commissioner of Income Tax, Central Revenue Building, Civil Lines, Raipur, District Raipur (C.G.) ---- Respondents For Petitioner : Ms. Smiti Sharma, Advocate For Respondents : Mr. Ajay Kumrani, Advocate Hon'ble Shri Justice Rakesh Mohan Pandey Order on Board 12.09.2023 Heard. 1) In this petition, the petitioner has challenged the order dated 10.04.2023 passed under Section 148 A (d) of the Income Tax Act, 1961 (for short 'IT Act') and notice issued under Section 148 of IT Act for the assessment year 2016-17. 2) The facts of the present case are that the petitioner is a partnership firm. The petitioner filed its return of income for the assessment year 2016-17 on 28.09.2017 showing its total -2- income at Rs.4,10,390/-. On 25.03.2023, the petitioner received notice under Section 148A(b) of the IT Act to the effect that income chargeable to tax for the assessment year 2016-17 has escaped assessment. On 05.04.2023 the petitioner mailed its reply to the Assistant Commissioner of Income Tax (for short 'ACIT') to the effect the notice is completely uncalled for and there is nothing on record to suggest that income chargeable to tax has escaped assessment. The Assessing Officer after appreciation of the reply and material available before it, passed an order under Section 148A (d) of the IT Act on 10.04.2023 and found the case of the petitioner fit for issuance of notice under Section 148 of the IT Act. Consequently, notice under Section 148 of the IT Act was also issued on 10.04.2023. 3) Learned counsel for the petitioner would submit that the order passed by the Assessing Officer and notice issued under Section 148 of the IT Act are illegal, arbitrary and without jurisdiction as no information was given and no material was placed to suggest that income chargeable to tax has escaped assessment. It is also stated that no information was given according to the proviso to Section 148 of the IT Act before issuing notice under Section 148 of the IT Act. She would further submit that the reply submitted by the petitioner was not taken into consideration while passing the orders under Section 148A (d) of the IT Act and thus, the order impugned is in violation of the principles of natural justice. She would further contend that the purchase of Rs.89,86,164/- was further sold to M/s Sarda Energy & Minerals -3- Limited and was duly recorded in the return for the purposes of income tax, VAT and Excise. The income of the sale and purchase was less than Rs.50 lacs and therefore, the notice issued by the Assessing Officer was barred by limitation. She has placed reliance on the judgment passed by the High Court of Delhi in the matter of Fena Pvt. Ltd. Vs. ACIT Circle 7-1 New Delhi & Anr., passed in W.P.(C) 6553/2022 & CM APPLs.19909-19910/2022; judgment passed by the Himachal Pradesh at Shimla in the matter of Swastik Wire Products Vs. Principal Commissioner of Income Tax and Ors., passed in CWP No. 6472 of 2022 dated 26.12.2022 and judgment passed by the High Court of Judicature at Calcutta in the matter of Somnath Dealtrade Private Limited Vs. Union of India & Ors., passed in M.A.T. No. 1036 of 2022. 4) On the other hand, learned counsel for the respondents would submit that the revenue got information that income chargeable to tax for the assessment year 2016-17 has escaped assessment within the meaning of Section 147 of the IT Act. The Revenue after going through the information and necessary documents found that the petitioner has made bogus purchases from M/s Rajendra Ispat, Raipur during the financial year 2015- 16 amounting to Rs.89,86,164/-. The Authorized Officer, during the course of survey under Section 133A of the IT Act in cases of M/s Pratyush Steels, M/s Abhishek Enterprises and M/s Rajendra Ispat on 24.01.2019 recorded the statement of Gitesh Agrawal, Abhishek Agrawal and Rajendra Chawhan and above -4- stated persons have admitted that they had issued bogus bills in respect of sales claimed to have been made during the financial year 2015-16 to various entities/persons after receiving payments through banking channels. He would further submit that according to the statutory scheme, the Assessing Officer after getting information found that the income chargeable to tax has escaped assessment and thereafter notice was issued under Section 148 of the IT Act and the same was duly replied by the petitioner. He would further submit that the consideration at the stage of passing an order under Section 148A (d) is thus limited to the ascertainment of information with the Assessing Officer that the income of the assessee has escaped assessment to tax. He would further contend that the issuance of notice under Section 148A (b) of the IT Act by the respondents is at present governed by the Central Government which was issued by the faceless assessment portal according to the memorandum issued by the Central Government dated 20.02.2023. He has placed reliance on the judgments of the Punjab and Haryana High Court at Chandigarh in the matters of Gian Castings Private Limited Vs. Central Board of Direct Taxes and others, CWP No.9142 of 2022 dated 02.06.2022, and Anshul Jain Vs. Principal Commissioner of Income Tax and another, CWP 10219 of 2022. 5) I have heard the learned counsel for the parties, perused the documents and considered the judgments cited by both the parties. -5- 6) Section 148A has been introduced in the Income Tax Act from 01.04.2021. This Section says that before issuing notice, the Assessing Officer shall conduct an inquiry and provide an opportunity of being heard to the assessee. After taking into consideration the reply filed by the assessee, the Assessing Officer shall decide by passing an order, whether the case is fit for issuance of notice under Section 148 of the Income Tax Act and a certified copy of such order passed under Section 148A (d) of the Income Tax Act along with such notice has to be served upon the assessee. The limitation for issuance of notice under Section 148 is provided in Section 149 of the Income Tax Act. In normal cases, no notice shall be issued if three years have elapsed from the end of the relevant assessment year. Notice beyond the period of three years from the end of the relevant assessment year can be issued where the Assessing Officer would not be in possession of books of accounts or other documents or evidence which would reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment, amounts to or is likely to amount to fifty lacs rupees or more for that year. In such cases, notice can be issued beyond the period of three years but not beyond the period of 10 years from the end of the relevant assessment year. Notice under Section 148 of the Income Tax Act can be issued when there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of an assessee for the relevant -6- assessment year. The specified authority for approving inquiries, providing an opportunity for passing orders under Section 148 of the Income Tax Act and for issuance of notice under Section 148 of the Income Tax Act is the Principal Commissioner or Principal Director or Commissioner or Director, if three years or less than three years have elapsed from the end of the relevant assessment year or Principal Chief Commissioner or Principal Director General or Chief Commissioner or Director General, if more than three years have elapsed from the end of the relevant assessment year. 7) In the present case, the Assessing Officer found that during the Assessment Year 2016-17, the petitioner has shown bogus purchases and escaped assessment to the tune of Rs.89,86,164/-. It is also evident from the order and the other documents that the petitioner has made bogus purchases from M/s Rajendra Ispat, Raipur during the financial year 2015-16 amounting to Rs.89,86,164/-. The statement of witnesses namely Gitesh Agrawal, Abhishek Agrawal and Rajendra Chawhan was recorded who admitted the fact of bogus bills in respect of sales claimed to have been made during the financial year 2015-16 to various entities. Notice was issued to the petitioner and a detailed reply was filed by the petitioner thereafter order was passed under Section 148A (d) of the IT Act by the ACIT. 8) Now coming to the judgments cited by learned counsel for the petitioner, in the matter of Swastik Wire Products (supra), the -7- High Court Himachal Pradesh has held that Section 148A of the IT Act was incorporated so as to ensure that there is proper application of mind by the authorities by passing a detailed, reasoned and a speaking order under Section 148A (d) of the IT Act, instead of passing a cryptic order in a mechanical manner. Para – 8 is reproduced below:- “8. At the outset, it needs to be noticed that Section 148A was incorporated so as to ensure that there is proper application of mind by the authorities by passing a detailed, reasoned and a speaking order under Section 148 A (d) of the Act, instead of passing a cryptic order in a mechanical manner. The Assessing Officer was expected to rebut each and every objection, reply and submissions with proper reasons. This is clearly evident from the new revised guidelines issued by the Central Board of Direct Taxes dated 01.08.2022, though the assessment in the case is prior to the issuance of such guidelines. Nonetheless, these guidelines would definitely work as a guideline and also an indicator as to why the same have been issued.” In the present case, the Assessing Officer after taking into consideration the material available before it and after going through the reply filed by the petitioner passed a detailed and well-reasoned order. 9) In the matter of Somnath Dealtrade Private Limited (supra), the High Court of Calcutta observed that the reply filed by the assessee was not taken into consideration and therefore, the order passed under Section 148A (d) of the IT Act and notice issued under Section 148 of the IT Act were set aside. The relevant paras – 10, 13 & 15 are reproduced herein below:- “10. Admittedly, the assessee had submitted the reply along with documents much prior to the said date, i.e. on 9th April, 2022 as noted above. The assessing officer has thereafter proceeded to pass the order under Section 148A (d) of the Act. The assessee, being aggrieved by such order, had filed the present writ petition. The order was challenged on the ground of gross procedural irregularity, violation of principles of natural justice, non- -8- consideration of the request made in the reply dated 9th April, 2022, non-consideration of the documents appended along with the said reply dated 9th April, 2022 and non-compliance of the request to provide the complete information about the insight portal report based on which the notice under Section 148A (b) of the Act was issued. 13. On going through the order dated 13th April, 2022 impugned in the writ petition, we find that none of these aspects have been adhered to by the assessing officer. The assessing officer no doubt has referred to the assessee's reply dated 9th April, 2022 but there is no discussion as to the objection raised by the assessee in their reply. There is no discussion on the documents, which were placed by the assessee along with the reply with soft copies uploaded in the e-proceeding. Though the assessing officer states that “in the light of the discussion and material available on record he was of the opinion that income chargeable to tax has escaped assessment”, there is no discussion on any of the materials, which were placed by the assessee along with the reply dated 9th April, 2022. Thus, it can be safely held that the order dated 13th April, 2022 passed under Section 148A (d) of the Act is not sustainable and liable to be set aside. 15. The learned Advocate referred to a decision of the Hon'ble Supreme Court in Bishal Ashwin Patel – Vs. - Assistant Commissioner of Income Tax Circle 25 (3) and Ors. reported in 2022 SC OnLine SC 366 for the proposition that an order has to be a reasoned order. There can be no quarrel over such proposition and the assessing officer having issued a show cause notice and invited a reply from the assessee was bound to assign reasons as to how in his opinion the reply is not satisfactory. This is conspicuously absent in the order dated 13th April, 2022. Reference was also made to the decision of the High Court of Delhi in the Case of Divya Capital One Private Limited – Vs. -Assistant Commissioner of Income Tax Circle 7 (1) Delhi & Anr. passed in WP(C) 7406 of 2022 dated 12th May, 2022. In fact, this decision was referred to and replied upon by this Court in the Case of M/s. R.N. Fashion Vs. Union of India and Ors passed in APOT 85 of 2022 dated 20th May, 2022. The relevant paragraphs of the judgment is as follows :- “ The opportunity provided under Clause (b) of Section 148A of the Act should be a meaningful opportunity. The learned Advocate appearing for the appellant has drawn our attention to a recent decision of the Delhi High Court in the case of Divya Capital One Private Limited vs. Assistant Commissioner of Income Tax, Circle-7 (1), Delhi and Anr. in WP(C)7406/2022 dated 12th May, 2022. We find that the facts in the said case are identical to that of the case before us. The Hon'ble Division Bench had taken note of the new re-assessment scheme introduced by the Finance Act, 2021 and pointed out -9- that the safeguards were brought in the amended re-assessment scheme in accordance with the judgment of the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. vs. ITO, reported in (2003) 259 ITR 19 (SC) before any exercise of jurisdiction to initiate reassessment proceedings under Section 148 of the Act. Further, the Court held that the term “information” as contained in Explanation-1 to Section 148 cannot be lightly resorted so as to reopen assessment and this information cannot be a ground to give unbridled powers to the revenue. Further the Court took into consideration the order which was impugned therein and found the same to be cryptic. The next aspect which the Court considered was whether the petitioner therein was denied effective opportunity to file reply and it was held that the petitioner therein had a right to get adequate time in accordance with the provisions of the Act to submit its reply and the assessing officer in the said case had passed an order under Section 148A (d) of the Act in great haste and in gross violation of the principles of natural justice as the assessee therein was not given reasonable time to file reply. Further the Court noted that Section 148A (b) permits the assessing officer to suo motu provide upto 30 days period to an assessee to respond to a show cause notice issued under Section 148A (b) which period may, in fact, be further extended upon an application made by the assessee in this behalf and such period given to the assessee is excluded in computing the period of limitation for issuance under Section 148A of the Act in terms of the 3rd proviso under Section 149 of the Act. In this said case also, the assessee had file their reply by 31st March, 2022 and the same was available on record. However, the reply was not considered as per the mandate contained in Section 148A (c) thereby violating the duty cast upon the assessing officer. In paragraph 16 of the said decision the significance of issuance of show cause at a stage prior to issuance of reassessment notice under Section 148 of the Act has been pointed out in the following terms: “This Court is of the opinion that significance of issuance of a show cause notice at a stage prior to issuance of a reassessment notice under Section 148 of the Act has been lost on the Respondents. This Court takes judicial notice that in a majority of reassessment cases post 1st April, 2021, the orders under Section 148A (d) of the Act use a template/general reason to reject the defence of the assessee on merits, namely, “found devoid of any merit because the assessee company has failed to produce the relevant documents in respect of transactions mentioned in show cause notice . . . . it is established that the assessee has no proper explanation. . .” Consequently, this Court is -10- of the opinion that a progressive as well as futuristic scheme of re-assessment whose intent is laudatory has in its implementation not only been rendered nugatory but has also had an unintended opposite result.” The facts of the present case are distinguishable from the facts of the case of Somnath Dealtrade Private Limited (supra). In the case at hand, revenue initiated proceedings under Section 148A of the IT Act after getting specific information in its Insight portal uploaded by ACIT/Deputy Commissioner of Income Tax, Central Circle-2, Raipur. It is also evident from the documents that during the course of the survey operation under Section 133A of the IT Act conducted on 24.01.2019, the department recorded the statement of the witnesses namely Gitesh Agrawal, Abhishek Agrawal and Rajendra Chawhan. From a perusal of the documents, it appears that the petitioner has been afforded a proper opportunity of hearing. 10) In the matter of Fena Pvt. Ltd. (supra), the High Court of Delhi set aside the order and notice under Section 148 of the IT Act on the ground that the Assessing Officer had not taken into consideration the replies along with documents/evidence filed by the assessee. In the present case, the Assessing Officer has issued notice, the petitioner participated in the proceedings, the statement of the witnesses was recorded and thereafter the order was passed, therefore, the facts of the present case are different from the facts of the matter of Fena Pvt. Ltd. (supra) 11) Now coming to the judgments cited by learned counsel for the -11- respondents. In the matters of Gian Castings Private Limited (supra) and Anshul Jain (supra) the Punjab and Haryana High Court at Chandigarh while dealing with a similar issue held that where the proceedings have not even been concluded by the statutory authority, the writ Court should not interfere at such premature stage. It is further held that it is not a case where from a bare reading of notice it can be axiomatically held that the authority has clutched upon the jurisdiction not vested in it. The correctness of order under Section 148A (d) of the Income Tax Act is being challenged on the factual premise contending that jurisdiction though vested has been wrongly exercised. There is a vexed distinction between jurisdictional error and error of law/fact within the jurisdiction and for rectification or errors statutory remedy has been provided. The order passed by the High Court of Punjab and Haryana has been affirmed by the Hon’ble Supreme Court in SLP(C) No.10762 of 2022 order dated 17.06.2022 and SLP No.14823/2022 order dated 02.09.2022, respectively. 12) The Division Bench of the High Court of Chhattisgarh in the matter of Barbrik Projects Ltd. Vs. Union of India and others, passed in Writ Appeal No.473 of 2022, dated 15.12.2022 while dealing with a similar issue in para 31(12), 32 & 33 observed as under : “31(12). After considering the reply of the assesse and data available on the record, it is well settled that the assessee has made transactions of Rs.2,20,00,275/- during the FY 2017-18 in form of bogus purchase from the M/s. Panveer Trading Private Limited who are involved in providing of accommodation entries in form of bogus sale/purchase for commission. The assessee is the -12- beneficiary company in this case and the above transaction where no goods were transferred from the seller to purchaser. Only entries have been made in the books. By making accommodation entries the assessee has raised bogus expenditure in terms of bogus purchase. Thus, the amount of purchase made from the above parties of Rs. 2,20,00,275/- has escaped assessment during the AY 2018-19. The information suggests that the income chargeable to tax has escaped assessment by Rs. 2,20,00,275/-….” 32. There is, prima facie, some material on the basis of which the Department could reopen the case. The petitioner had not even made an attempt to assert that the material facts relied on in the SCN is erroneous. 33. In view of the above, we are of the opinion that no interference is called for with the order of the learned Single Judge. Accordingly, the writ petition is dismissed.” 13) At the same time, the respondents have cited certain judgments passed by various High Courts and some of them have been affirmed by the Hon’ble Supreme Court where it is categorically held that if there is no procedural fault, the Writ Court should not interfere at such premature stage when the proceeding initiated against the assessee is yet to be concluded by the statutory authority and in one of the decisions passed by the Division Bench of this Court it was held that the bogus purchases can be made the basis for issuance of notice under Section 148 of the Income Tax Act and the said writ petition preferred by the assessee was dismissed. 14) In view of the above, it is quite vivid that the notice was issued to the petitioner, reply was filed, the same was taken into consideration, statement of the witnesses was recorded and thereafter order was passed under Section 148A (d) of the IT Act and the notice was issued under Section 148 of the IT Act; the matter is still pending before the authority and the petitioner has sufficient opportunity to take all defences available to him. In that -13- view of the matter, I do not find any good ground to interfere with the order passed by the authorities under Section 148A (d) of IT Act and notice issued under Section 148 of the IT Act. Consequently, the present petition fails and is hereby dismissed. Sd/- (Rakesh Mohan Pandey) Judge vatti "