SMT KOMARLA YOGENDRA KEERTANA V. THE PRINCIPAL CHIE COMMISSIONER OF INCOME TAX

WP/10266/2023

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In this case, Smt. Komarla Yogendra Keertana, the petitioner, challenged a notice and subsequent order issued by the Income Tax Department under Section 148A(b) and 148A(d) of the Income Tax Act, 1961. The notice required the petitioner to respond within five days, which was less than the minimum seven days mandated by the law. The petitioner argued that this procedural error alone was sufficient to quash the notice and the order. The respondents admitted to the error but contended that the petition lacked merit. The court, referencing a similar case from the Bombay High Court, found in favor of the petitioner, quashing the notice and order due to the procedural impropriety and other substantive issues identified in the order.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 761778 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 09-01-2024
• Assessment Year: misc
• Other Referred Cases: Mukesh J. Ruparel Vs. Income Tax Officer, Ward 27(2)(1)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: E I SANMATHI
• Assessee Lawyers: SHEETAL BORKAR
• Keywords: Escaped assessment; Income Tax; Notice; Quash
• Section: 148A(b); 148A(d); 226; 227

Judgement Text

" - 1 - NC: 2024:KHC:1274 WP No. 10266 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 9TH DAY OF JANUARY, 2024 BEFORE THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO. 10266 OF 2023 (T-IT) BETWEEN: SMT KOMARLA YOGENDRA KEERTANA D/O SHIVAKUMAR KOTA AGED ABOUT 52 YEARS R/A 6, FLAT NO.104, NR SREEGLITZ FIRST FLOOR, 3RD MAIN CHAMARAJPET BANGALORE-560 018. PAN CARD-AVAPK2949K …PETITIONER (BY SMT. SHEETAL BORKAR ., ADVOCATE) AND: 1. THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX KARNATAKA AND GOA REGION GROUND FLOOR, C R BUILDING NO.1 QUEENS ROAD BENGALURU. 2. THE INCOME TAX OFFICER WARD 7(2)(5), BMTC BUILDING 80 FEET ROAD, 6TH BLOCK NEAR KHB GAMES VILLAGE KORAMANGALA BENGALURU-560 095. …RESPONDENTS (BY SRI. E.I. SANMATHI.,ADVOCATE) THIS W.P IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED ORDER DT. 31.03.2022 VIDE DIN AND NOTICE NO. ITBA/AST/F/148A/2021- 22/1042355009(1) PASSED BY THE R2 U/S 148A(D) OF THE INCOME TAX ACT 1961 VIDE ANNX-B. Digitally signed by VANDANA S Location: HIGH COURT OF KARNATAKA - 2 - NC: 2024:KHC:1274 WP No. 10266 of 2023 THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER In this petition, petitioner seeks quashing of the impugned order at Annexure-B dated 31.03.2022 issued by the 2nd respondent under Section 148A(d) of the Income Tax Act, 1961 (for short ‘the I.T.Act’) and for other reliefs. 2. Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record. 3. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned counsel for the petitioner invites my attention to the impugned Notice at Annexure-A dated 24.03.2022 issued under Section 148A(b) of the I.T. Act in order to point out that the said Notice which stipulates a period of 5 days for the petitioner to submit his reply falls short of the prescribed minimal period of 7 days as envisaged under Section 148A(d) of the I.T. Act and consequently, on this ground alone, the impugned Notice and further proceedings including the impugned order at Annexure-B passed under Section 148(A)(d) of the I.T. Act deserves to be quashed. - 3 - NC: 2024:KHC:1274 WP No. 10266 of 2023 4. Per contra, learned counsel for the respondents while admitting that the impugned Notice at Annexure-A dated 24.03.2022 calls upon the petitioner to submit the reply on or before 29.03.2022 submits that there is no merit in the petition and the same is liable to be dismissed. 5. I have given my anxious consideration to the rival submissions and perused the material on record. 6. In the case of Mukesh J. Ruparel Vs. Income Tax Officer, Ward 27(2)(1) – W.P.No.15268/2023 dated 25.07.2023, the Hon’ble Division Bench of Bombay High Court has held that a Notice under Section 148A(b) is illegal, invalid and inoperative, if it prescribes a period lesser than 7 days in view of express language employed in Section 148A(b). The Bombay High Court held as under:- “Petitioner is impugning a notice dated 15th March 2023 issued under Section 148A(b) of the Income Tax Act, 1961 (the Act), the order dated 31st March 2023 passed under Section 148-A(d) of the Act and notice dated 31st March 2023 issued under Section 148 of the Act. 2. Petitioner is an individual who did not file return of income for Assessment Year 2016-17 because his income was less than taxable limit. 3. Petitioner received a notice dated 15th March 2023 under Clause 148A(b) of the Act from Respondent No.1, - 4 - NC: 2024:KHC:1274 WP No. 10266 of 2023 stating that Respondent No.1 has information which suggests that income chargeable to tax for Assessment Year 2016-17 has escaped assessment within the meaning of Section 147 of the Act. Petitioner was provided with information / enquiry on which reliance was placed in the form of annexure to the notice and Petitioner was called upon to show cause on or before 28th March 2023 as to why a notice under Section 148 of the Act should not be issued. The information which suggested that there has been an escapement of income from assessment provided details of a property that Petitioner had purchased. Petitioner was directed to provide head-wise computation of income, details of purchase of immovable property during Financial Year 2015-16 supported with copy of registered agreement with annexure II, details of payment made and source of acquisition of said immovable property. 4. Petitioner submitted an elaborate reply on 18th March 2023 and also raised certain objections. The main objection raised was that under the provision of Section 148A(b) of the Act, the assessee should be provided an opportunity of being heard by serving upon the assessee a notice to show cause within such time as may be specified in the notice being not less than seven days but not exceeding thirty days from the date on which said notice has been issued. Since the notice dated 15th March 2023 provides only for five days when the law requires minimum seven days to be given, the notice itself was bad-in-law. 5. Along with reply, Petitioner also provided a photo copy of the notarised affidavit of Petitioner's brother affirmed on 18th March 2023, in which the brother has confirmed of giving gift of Rs.75 lakhs to Petitioner on 26th March 2019, which is much beyond the relevant Assessment Year. 6. Respondent No.1 has passed the impugned order dated 31st March 2023 under Clause D of Section 148A of the Act. In the order, Respondent No.1 states that from the statement issued by HDFC Bank for the period 1st April 2018 to 31st March 2019 of the brother, it is seen that there is a credit entry of Rs.1 Crore on 19th March 2019, out of which Rs.75 lakhs has been paid to Petitioner on 26th March 2019. Respondent No.1 also states that the gift deed submitted by Petitioner from the brother has not been notarised. - 5 - NC: 2024:KHC:1274 WP No. 10266 of 2023 7. Moreover, Respondent No.1 states that income chargeable to tax has escaped assessment without mentioning what is the amount of income that has escaped assessment. Further, the approval under Section 151 of the Act which is annexed to the impugned order is of one Poonam Vijay Chhabria whose PAN number is also entirely different from the PAN number of Petitioner. Respondent No.1 is totally silent about the objections raised by Petitioner of minimum seven days notice required. Mr. Gandhi states that on each of these grounds not only the impugned order dated 31st March 2023 but also the notice dated 31st March 2023 itself should be quashed and set aside. 8. No reply has been filed though Petition was served more than a month ago. We have, therefore, decided to go ahead and consider the matter and dispose it since we were, prima facie, satisfied that there was merit in Petitioner's submissions. Section 148-A(B) of the Act reads as under:- “provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a).\" 9. The notice dated 15th March 2023 gives time only up to 20th March 2023 to show cause. We have to note that even the guidelines dated 1st August 2022 for issuing of notice under Section 148 of the Act also provide that if the result of an enquiry / information available suggests that income chargeable to tax has escaped assessment, the Assessing Officer shall provide an opportunity of being heard by assessee by issuing the show cause notice under Section 148A(b) of the Act and the notice shall provide between seven to thirty days time for the assessee to submit their reply. A template of the show cause notice is also annexed to the guidelines. Therefore, in view of the guidelines, we - 6 - NC: 2024:KHC:1274 WP No. 10266 of 2023 would also read that the minimum seven days required to be made as a mandatory requirement and failure to comply with would render a notice itself invalid. Therefore, on this ground alone, the notice requires to be quashed and set aside. Perhaps, being aware of this position, Respondent No.1 has chosen not to deal with these objections raised by Petitioner in the reply to the show cause notice. 10. We also found in the said guidelines a provision that the order under Section 148A(d) of the Act shall be sent to assessee along with the approval of the specified authority for such order under Section 148A(d) of the Act. In the case at hand, the approval that has been sent is of some other assessee and not Petitioner. This also indicates non- application of mind by Respondent No.1. On this ground also, the order dated 31st March 2023 impugned in the Petition is required to be quashed and set aside. 11. Further, in the guidelines to which is annexed a template of the order to be passed under Section 148A(d) of the Act provides for mentioning of amount escaped based on the information and how this amount is represented in the form of assets. It also provides that the Assessing Officer will specify the quantum of income / assets / expenditure / entry which has escaped assessment. This not stated in the order under Clause D of Section 148 of the Act. On this ground also, the said order dated 31st March 2023 is required to be quashed and set aside. 12. Further, there is a factually incorrect statement made in the order that the affidavit of Petitioner's brother that was submitted was not notarised when it was factually a notarised affidavit. 13. Further, in the impugned order, it is stated that the HDFC statement / document do not substantiate the credit worthiness and genuineness of the lender of the gift, i.e., brother of Petitioner. Mr. Gandhi states that if only Petitioner was called upon to submit, Petitioner would have submitted evidence towards credit worthiness of the brother because in the show cause notice issued, Petitioner was only directed to call upon to disclose the source from which he got money to pay for the flat. - 7 - NC: 2024:KHC:1274 WP No. 10266 of 2023 In over view, therefore,, on this ground also, the impugned order dated 31st March 2023 is required to be quashed and set aside. 14. Accordingly, we hereby quash and set aside the notice dated 15th March 2023 issued under clause (b) of Section 148-A of the Act, the impugned order dated 31st March 2023 issued under clause (d) of Section 148A of the Act and consequent notice dated 31st March 2023 issued under Section 148 of the Act. 15. Petition disposed. There shall be no order as to costs.” 7. In my considered opinion, in the light of the undisputed fact that the impugned Notice at Annexure-A dated 24.03.2022 calls upon the petitioner to submit his response/reply before 29.03.2022 i.e., within a period of 5 days, which is lesser than the minimum prescribed period of 7 days as contemplated under Section 148A(d) coupled with the judgment of the Bombay High Court referred to supra, I am of the considered opinion that the impugned Notice at Annexure-A as well as the impugned order at Annexure-B deserves to be quashed and liberty is to be reserved in favour of the respondents to initiate appropriate proceedings against the petitioner in accordance with law. - 8 - NC: 2024:KHC:1274 WP No. 10266 of 2023 8. In the result, I pass the following:- ORDER (i) Petition is hereby allowed. (ii) The impugned Notice at Annexure-A dated 24.03.2022 and impugned order at Annexure-B dated 31.03.2022 passed by the respondents are hereby quashed. (iii) Liberty is reserved in favour of the respondents to initiate appropriate proceedings against the petitioner in accordance with law, subject to all just exceptions. Sd/- JUDGE Srl. "