U.S. Associates 3, Isha Complex, Churi Line, Gole Bazar Raipur (C. G.) Through Its Proprietor Umesh Kumar Jain V. Principal Commissioner of Income Tax Raipur-2, Aayakar Bhavan Civil Lines, Raipur, Chhattisgarh and The Income Tax Officer Ward -4 (1), Civil Lines Raipur, Chhattisgarh

WPT/254/2022

AI Insights

The case involves U.S. Associates, represented by its proprietor Umesh Kumar Jain, challenging the notices and orders issued under Section 148 and Section 148A(b) of the Income Tax Act, 1961, by the Income Tax Department. The petitioner contended that the authorities included a transaction of Rs. 14 Lakhs in the assessment, which was not part of the original notices, thereby exceeding the monetary threshold for reassessment as specified in the departmental circular. The court examined the legality of including this transaction and the adherence to procedural requirements in issuing the notices and conducting the reassessment.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 821135 (HC-CHHATTISGARH)
• Appeal Type: Others
• Pronouncement Date: 01-12-2022
• Assessment Year: misc
• Other Referred Cases: Commissioner of Customs, Mumbai Vs. Toyo Engineering India Ltd., N.D. Bhatt, Inspecting Assistant Vs. I.B.M. World Trade Corporation, Equitable Investment Co. (P.) Ltd. vs. ITO, M/s Kishan Lal and Company and Another Vs. Additional Commissioner of Commercial Tax & Another
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: NAUSHINA ALI; AJAY KUMRANI
• Assessee Lawyers: MOOLCHAND JAIN; VIJAY SHANKAR MISHRA
• Keywords: Assessment; Income Tax; Legal Proceedings; Notice; Reassessment
• Section: 148; 148A(b)

Judgement Text

"-1- NAFR HIGH COURT OF CHHATTISGARH AT BILASPUR Writ Petition (T) No.254 of 2022 1. U.S. Associates 3, Isha Complex, Churi Line, Gole Bazar Raipur (C. G.) Through Its Proprietor Umesh Kumar Jain, S/o Late Mannalal Jain Aged About 49 Years R/o H. No. 51/723, Near Davda International School Davda Colony, Raipur (C.G). ---- Petitioners Versus 1. Principal Commissioner of Income Tax Raipur-2, Aayakar Bhavan Civil Lines, Raipur, Chhattisgarh. 2. The Income Tax Officer Ward -4 (1), Civil Lines Raipur, Chhattisgarh. ---- Respondents For Petitioner : Shri Moolchand Jain and Shri Vijay Shankar Mishra, Advocates. For Respondents : Smt. Naushina Ali and Shri Ajay Kumrani, Advocates on behalf of Shri Amit Choudhary, Advocate. Hon'ble Shri Justice P. Sam Koshy Order on Board 01.12.2022 1. Challenge in the present writ petition is notice under Section 148 of the Income Tax Act, 1961 (in short, the Act of 1961) dated 22.07.2022 and also the order dated 22.07.2022 under Section 148A(b) of the Act, 1961. 2. The primary contention of the counsel for the petitioner is that the authorities while passing the order under Sections 148A(b) and Section 148 of the Act of 1961 on 22.07.2022 have considered certain transactions which were not part of the notice that was originally issued to the petitioner under Section 148 of the old Act and also under Section 148A(b) of the new Act. 3. The contention of the petitioner further is that if the said 14 Lakh rupees transaction which has been considered by the Department is excluded from the proceedings then the amount would be less than 50 Lakh rupees -2- and would therefore be outside the purview of the assessment proceedings as per circular dated 11.05.2022. 4. The contention of the petitioner is that the authorities concerned have taken into consideration the transaction of an amount of Rs.14 Lakhs made by one Smt. Rekha Soni while carrying out the assessment, but the said 14 Lakhs transaction was not the contents of the notice that was issued. Therefore, the petitioner never had an opportunity to submit his explanation at the first instance. That, it is only during the assessment proceeding that the officers of the Department had taken this aspect and have also added the said amount while passing the order under Section 148A(b)(d). This, according to the petitioner is not otherwise permissible as the authorities could have proceeded to assess in respect of a transaction which did not form part of the notices that were issued initially under Section 148 of the old Act on 29.06.2021 nor did it form part of the notice that was subsequently issued under Section 148A(b) of the new Act that was issued on 25.05.2022. 5. It is the further contention of the petitioner that if the said 14 Lakhs rupees is excluded from the proceedings then the income that has escaped assessment would be of an amount of Rs.36,99,555 which is less than 50 Lakhs rupees and in terms of the circular dated 11.05.2022 wherein it has been specifically held that notice under Section 148 could be issued only if the case is one where the amount escaping the assessment of an asseessee in that year is likely to be more than 50 Lakhs rupees. In the instant case the amount minus (-) 14 Lakhs added by the Department which did not form part of the notice would bring the total amount to less than 50 Lakh rupees. Thus, prima facie the proceedings would have been attracted by the circular dated 11.05.2022 and it could not had been initiated itself. -3- 6. It is also glaringly visible from the two notices that were issued on 29.06.2021 as also on 25.05.2022 i.e. the notice initially issued under Section 148 of the old Act and under Section 148A(b) of the new Act that the department has not disclosed the fact in its notice of the petitioner having suppressed this 14 Lakh rupees transaction and this has also escaped assessment of the Department. In the absence of the same being reflected in the notice, the assessment yet being made of the said amount would be prima facie bad in the light of the judgment of the Supreme Court in case of Commissioner of Customs, Mumbai Vs. Toyo Engineering India Ltd. 2006(7) SCC 592 wherein in paragraph 16 the Supreme Court has emphatically held that the Department cannot travel beyond the show cause notice. 7. There is another judgment rendered by the Bombay High Court in this respect in N.D. Bhatt, Inspecting Assistant Vs. I.B.M. World Trade Corporation, 1995 216 ITR 811 Bom, wherein in paragraph 18 it has been held as under: “18. It is also well settled that the reasons for reopening are required to be recorded by the assessing authority before issuing any notice under Section 148 by virtue of the provisions of s. 148(2) at the relevant time. Only the reason so recorded can be looked at for sustaining or setting aside a notice issued under s. 148. In the case of Equitable Investment Co. (P.) Ltd. vs. ITO (1988) 174 ITR 714 (Cal) a Division Bench of the Calcutta High Court has held that where a notice issued under Section 148 of the IT Act, 1961, after obtaining the sanction of the CIT, is challenged, the only document to be looked into for determining the validity of the notice is the report on the basis of which the sanction of the CIT has been obtained. The IT Department cannot rely on any other material apart from the report. In the case before it, the Calcutta High Court refused to take into consideration the affidavit filed by the IT Department giving some additional -4- reasons. In the present case, the reasons which are given by the IAC for reopening the assessments which are annexed to the affidavit in rejoinder of the appellants are to the effect that in respect of the Assessment Year 1967-68 to 1973-74 there are errors in the principle of allocating headquarters expenses to India which have been deducted. The net effect is that there has been an excess charge of headquarters expenses allocated to India. Each of the notices sets out the relevant error for the accounting year. The reasons, therefore, do not indicate in any manner any deliberate omission or suppression of any fact or of this error, on the part of the assessee at the time of the original assessment. Nor do these reasons allege that the assessee was in possession of the facts which it has failed to prove. In these circumstances, the provision of s. 147(a) are not attracted. 8. Similar view has also been taken by the Division Bench of this High Court in a bunch of Writ Appeals which were decided on 17.05.2018, the leading of which being M/s Kishan Lal and Company and Another Vs. Additional Commissioner of Commercial Tax & Another, wherein in paragraph 8 it has been mentioned as under : “8. It is settled by the Supreme Court in Commissioner of Customs, Mumbai Vs.Toyo Engineering India Ltd. 1 at para 16 that the department/ Revenue cannot travel beyond the show- cause notice. Thus, the argument advanced by the learned counsel appearing for the State that as a matter of fact what is sought to be revised was the reassessment order and not the original assessment order need not be considered, as the same is not permissible in view of what has been held by the Supreme Court.” 9. Given the aforesaid facts and circumstances of the case and also keeping in view the circular of the Department dated 11.05.2022, this court is of the opinion that the order under Section 148A(b) and order Section 148 of the Act of 1961 dated 22.07.2022 in the given factual backdrop would not be -5- sustainable. The same therefore deserves to be and is hereby set aside reserving the right of the Department, if the law permits, to take appropriate recourse available in accordance with law. 10. The writ petition accordingly stands allowed and disposed of. Sd/- (P. Sam Koshy) Judge inder "