M/S SIDHBALI KRIPA ENTERPRISES V. INCOME TAX OFFICER AND ANOTHER

WTAX/1090/2023

AI Insights

The case involves M/S Sidhbali Kripa Enterprises, a partnership firm, challenging the initiation of reassessment proceedings for the Assessment Year 2019-20 by the Income Tax Officer. The firm had reported no income for the year despite significant financial transactions, including a loan of Rs. 1,75,00,000 to two individuals. The Income Tax Department, suspecting that income had escaped assessment, issued a show cause notice and subsequently an order under Section 148A(d) of the Income Tax Act, 1961. The petitioner argued that the reassessment was without jurisdiction and violated principles of natural justice, among other claims. However, the court dismissed the writ petition, allowing the reassessment to proceed.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 746977 (HC-ALLAHABAD)
• Appeal Type: Others
• Pronouncement Date: 20-09-2023
• Assessment Year: misc
• Other Referred Cases: Kamlesh Kumari Vs. Union of India, M/s Gee Kay Finsee Consultancy Pvt. Ltd. Vs. Principal Chief Commissioner of Income Tax and 2 others, Dharmendra Kumar Singh Vs. Union of India and 2 others, Bharata Mint & Allied Chemicals Vs. Commissioner of Commercial Tax, Nabco Products Pvt. Ltd. Vs. Union of India and 2 others, Deepak Kumar Yadav Vs. Principal Commissioner of Income Tax and another, Anshul Jain Vs. Principal Commissioner, Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: GAURAV MAHAJAN
• Assessee Lawyers: ATUL GUPTA; PRAKHAR SHUKLA
• Keywords: Income escape assessment; Jurisdiction; Loan transaction; Natural Justice; Reassessment proceedings; Show cause notice
• Section: 147; 148; 148A(b); 148A(d); 131(1A); 148(d)

Judgement Text

"Neutral Citation No. - 2023:AHC:185975-DB Chief Justice's Court Case :- WRIT TAX No. - 1090 of 2023 Petitioner :- M/S Sidhbali Kripa Enterprises Respondent :- Income Tax Officer And Another Counsel for Petitioner :- Atul Gupta,Prakhar Shukla Counsel for Respondent :- Gaurav Mahajan Hon'ble Pritinker Diwaker,Chief Justice Hon'ble Ashutosh Srivastava,J. Heard Sri Atul Gupta, learned counsel for the petitioner and Sri Gaurav Mahajan, learned counsel for the Revenue. The challenge laid in this writ petition is to the order dated 31.03.2023 and impugned notice dated 31.03.2023 whereby and whereunder the reassessment proceedings for the assessment year 2019-20 are sought to be initiated. A prayer for prohibiting the Respondent No.1 or any other Income Tax Authority from proceeding further with the reassessment proceedings for Assessment Year 2019-20 has been sought. It is the case of the petitioner that it is a partnership firm formed on 18.04.2018 by five partners for the purposes of carrying on business of wholesale distributorship or C&F Work. The partnership firm was reconstituted on 01.11.2019 and a new partnership firm was registered as 2 out of 5 partners existed from the firm. The remaining partners infused a sum of Rs.1,75,31,000/- as capital during the FY 2018-19. It is stated that the firm during the Financial Year 2018-19 extended a loan of Rs.1,75,00,000/- equally to two widows who were the neighbours of the partners with the understanding that the same would be repaid. The loan was duly recorded in the books of the petitioner firm. In the Assessment Year 2019-20 there was no revenue generation from the business operations of the firm and consequently a return of income for Assessment Year 2019-20 was filed on 31.08.2019 declaring total income as Nil. The Deputy Director of Income Tax Investigation, Ghaziabad issued summons to the petitioner under Section 131 (1A) of the Income Tax Act requiring the petitioner to furnish the details and purpose of the loan advanced to the two ladies. Petitioner is stated to have submitted detail asked for. The Respondent No.1 issued a show cause notice under Section 148A(b) of the Income Tax Act for Assessment Year 2019-20 stating that income declared as Nil in the return was not commensurate with the transaction of Rs.1,75,00,000/- which suggested that the income chargeable to tax had escaped assessment. The petitioner filed detailed reply to the show cause on 27.03.2023, however, the reply has not found favour with the Respondent No.1 and the impugned order has been passed. Learned counsel for the petitioner has vehemently argued that the impugned order passed by the Respondent No.1 and returned that the income chargeable to tax has escaped assessment with the meaning of Section 147 of the Income Tax Act is wholly erroneous an without application of mind inasmuch as the returns filed by the borrowers i.e. the two widow ladies for the Assessment Year 2019-20 has been accepted by the Income Tax Officer Ward (2)(3)(4), Hapur under Section 148(d) of the Act and there was no occasion to doubt the return filed by the petitioner for the Assessment Year 2019-20. It is also argued that the impugned order passed by the Respondent No.1 suffers from the vice of non compliance of the principles of natural justice inasmuch as though a show cause notice was given but no opportunity of personal hearing was afforded. It is further submitted that the reassessment proceedings initiated are without jurisdiction, the time limit provided to submit reply to the show cause notice under Section 148A(b) was in contravention of the requirement of the law inasmuch as the law contemplate 07 day but only 05 days were provided to the petitioners, the impugned notice has been issued to verify the facts which is impermissible in reassessment proceedings, the copy of the approval of specified authority, information replied upon and the results of enquiry not provided to the petitioner. It is thus submitted that the impugned orders are liable to be set aside. Reliance has been placed upon various final orders and interim orders passed by the Coordinate Benches of this Court to buttress his submissions. Reliance has been placed on the judgements passed by this Court in Kamlesh Kumari Vs. Union of India [Writ (Tax) No.301 of 2023], M/s Gee Kay Finsee Consultancy Pvt. Ltd. Vs. Principal Chief Commissioner of Income Tax and 2 others (Writ (Tax) No.553 of 2023, Dharmendra Kumar Singh Vs. Union of India and 2 others, reported in 2022 (5) TMI 390, Bharata Mint & Allied Chemicals Vs. Commissioner of Commercial Tax Writ (Tax) No.1029 of 2021 and Nabco Products Pvt. Ltd. Vs. Union of India and 2 others [Writ (Tax) No.997 of 2022]. Sri Gaurav Mahajan in opposition to the writ petition submits that the objections filed by the petitioner have been duly considered and the assessing authority has found that it is a fit case to issue notice under Section 148. He submits that the consideration at the stage of passing order under Section 148A(d) is limited to ascertainment of information with the assessing officer that income of assessee has escaped assessment to tax. Final determination on the question whether income of assessee has actually escaped assessment is then to be made after notice under Section 148, by passing an order of assessment or reassessment under Section 147 subject to the provisions of Section 148 to 153 of the Act. It is also argued that the petitioner is at liberty to raise all factual issues/objections at the appropriate stage of the proceedings and no prejudice is being caused to the petitioner. It is contended that this Court would not be justified in embarking upon the correctness or otherwise of the information available with the assessing Officer while taking decision under Section 148A(d) of the Act. Reliance has been placed upon a decision of a Coordinate Bench of this Court in Writ (Tax) No.561 of 2023 (Deepak Kumar Yadav Vs. Principal Commissioner of Income Tax and another) decided on 05.05.2023. We have heard learned counsel for the parties and have given our anxious consideration to the rival submissions. We have also perused the records. We find substance in the submissions of Sri Mahajan, learned counsel for the Revenue. The Respondent No.1 has proceeded to pass an order on 31.03.2023 under Section 148A(d) of the Income Tax Act, 1961 rejecting the objection of the petitioner to the show cause notice under Section 148A(b) of the Income Tax Act, 1961 on the ground that information exists to suggest that the transaction of Rs.1,75,00,000/- needs to be verified. Hence the reply of the assessee has been considered but the same is not found to be satisfactory. The assessee has not offered his unaccounted unexplained income for taxation purpose in his return of income. It is precisely evident that this office has certain information amounting to Rs.1,75,00,000/- which strongly suggests that the income chargeable to tax has escaped assessment for Assessment Year 2019-20. A consequential notice has also been issued to the petitioner on 31.03.2023 under Section 148 of the Act. The Income Tax Act, 1961 does not contemplate any detailed adjudication on the merits of information available with the Assessing Officer at the stage of passing order under section 148A(d) of the Act of 1961. In our considered view there is a specific purpose for not introducing any further enquiry or adjudication in the statute, on the correctness or otherwise of the information, at this stage. The reason for it is obvious. Under the scheme of the Act a detailed procedure has been provided under Section 148 for issuance of notice whereafter the assessing authority has to determine, in the manner specified, whether income has escaped assessment and the defence of assessee, on all permissible grounds, remains open to be pressed at such stage. The ultimate determination made by the assessing authority under Section 147 for reassessment is otherwise subject to appeal under Section 246-A of the Act. Merits of the information referable to Section 148A thus remains subject to the reassessment proceedings initiated vide notice under Section 148 of the Act. It is for this reason that issues which require determination at the stage of reassessment proceedings and in respect of which departmental remedy is otherwise available are not required to be determined at the stage of decision by the assessing authority under Section 149A(d). The scope of decision under Section 148A(d) is limited to the existence or otherwise of information which suggests that income chargeable to tax has escaped assessment.\" Thus, in our opinion, the impugned order under Section 148A(d) of the Act and notice under Section 148 would not warrant any interference under Article 226 of the constitution of India as challenge to such order would be available to an assessee while challenging the order passed in reassessment proceedings consequent to the notice issued under Section 148 of the Act. The Apex Court in the case of Anshul Jain Vs. Principal Commissioner, Income Tax, reported in (2002) 143 taxman.com 38 observed as under:- \"What is challenged before the High Court was the re-opening notice under Section 148A(d) of the Income Tax Act, 1961. The notices have been issued, after considering the objections raised by the petitioner. If the petitioner has any grievance on merits thereafter, the same has to be agitated before the Assessing Officer in the re- assessment proceedings. Under the circumstances, the High Court has rightly dismissed the writ petition. No interference of this Court is called for. The present Special Leave Petition stands dismissed.\" In view of the above, we find no merit in the challenge laid to the order dated 31.03.2023 passed under Section 148A(d) of the Income Tax Act, 1961 as well as to the notice dated 31.03.2023 under Section 148 of the Act. The writ petition as framed fails and is dismissed. No order as to costs. Order Date :- 20.9.2023 pks (Ashutosh Srivastava, J) (Pritinker Diwaker, CJ) Digitally signed by :- PAWAN KUMAR SINGH High Court of Judicature at Allahabad "