Abdul Majeed Son Of Shri Ali Mohammed v. Income Tax Officer, Ward 1, Jhunjhunu

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 7853/2022 Abdul Majeed Son Of Shri Ali Mohammed, Aged About 64 Years,Resident Of Ward No. 18, Bara Mohalla, Jhunjhunu 333001 ----Petitioner Versus Income Tax Officer, Ward 1, Jhunjhunu Having its Address AtBehind Collectorate, Mandawa Road, Jhunjhunu 333001 ----Respondent For Petitioner(s) : Mr. Siddharth Ranka Advocate with Mr. Muzaffar Iqbal Advocate, Mr. Saurav Harsh Advocate & Ms. Apeksha Bapna Advocate. For Respondent(s): Mr. Amit Malani Advocate on behalf of Mr. Nikhil Simlote Advocate. HON'BLE MR. JUSTICE MANINDRA MOHAN SHRIVASTAVA HON'BLE MRS. JUSTICE SHUBHA MEHTAJudgment / Order Reportable 29/06/2022 Heard. With the consent of the parties, the matter is heard finally asthe reply has been filed. This writ petition seeks to assail correctness and validity oforder dated 29.03.2022 passed by the respondent, whereby, afterinitiating proceedings under Section 148A (d) of the Income TaxAct, 1961 (herein after referred to as ‘the Act’) on the formation of an opinion that income chargeable to tax has escapedassessment, the authority proceeded to issue notice under Section148 of the Act. Brief facts, relevant and necessary for adjudication of thecontroversy involved in the present writ petition are that on 15.03.2022, the respondent issued notice under clause (b) ofSection 148A of the Act on the basis of certain information whichsuggested that income chargeable to tax for the assessment year2015-2016 has escaped assessment within the meaning of Section147 of the Act. The notice was sent along with the details of thecash deposits in the account of the assessee maintained with theCorporation Bank, which according to the notice disclosed depositof a total amount of Rs.52,75,000/-. The notice stated that theassessee did not disclose this amount of cash deposit during therelevant financial year and, therefore, on that basis, theproceedings are required to be initiated. Replying to the said notice, the petitioner-assessee statedthat the initiation of proceedings on the basis that the cashdeposits during the relevant financial year are Rs.52,75,000/- isfactually incorrect and according to the petitioner-assessee, thetotal amount of cash deposit in his bank account in theCorporation Bank was only Rs.19,39,000/-. The petitioner-assessee, in order to satisfy the authority that the total cashdeposits in that particular financial year were only Rs.19,39,000/-,also annexed along with the reply, complete bank statement oftransactions done during the financial year in question. The competent authority, however, proceeded to pass anorder for issuance of notice under Section 148 of the Act on29.03.2022. Thereafter, a notice under Section 148 of the Act hasbeen issued to the petitioner-assessee. The order dated29.03.2022 passed under Section 149A (d) of the Act as alsonotice under Section 148 of the Act have been assailed in thispetition. Learned counsel for the petitioner-assessee contendedbefore us that in order to initiate proceedings under Section 148of the Act, the law requires the authority to first arrive atsatisfaction after holding an enquiry in terms of provisionscontained in Section 148A of the Act based on material availableon record which must suggest that income chargeable to tax hasescaped assessment. He would further contend that in case thisexercise is under taken beyond a period of three years withreference to the concerned assessment year, the proceedingsunder Section 148 of the Act could be initiated only when the totalamount of the alleged income which is said to have escapedassessment is more than Rs.50,00,000/-, otherwise such exercisemay not lead to proceedings under Section 148A of the Actbecause of statutory impediment under Section 149 Sub-Section 1Clause (b) of the Act. Learned counsel for the petitioner-assessee vehementlycontended that the entire material, which has been collected bythe authority, does not contain any material to even remotelysuggest that the total income which according to them escapedassessment is more than Rs.50,00,000/-. Only on conjecture thatthe assessee may have some more bank accounts, order has beenpassed under Section 148A (d) of the Act followed by notice underSection 148 of the Act. Therefore, it is argued, the order andproceedings are liable to be set aside. Per-contra, learned counsel appearing for the revenue wouldsubmit that the authority has drawn detailed proceedings aftergiving proper opportunity of hearing to the petitioner-assessee byissuing notice under Section 148A. Pursuant to the notice, thepetitioner-assessee submitted his reply and the petitioner- assessee could not dispute that during the relevant assessmentyear, certain cash deposits were made by the petitioner-assessee.While the department’s stand is that the cash deposits are morethan Rs.50,00,000/-, this being disputed by the petitioner-assessee, is essentially in the realm of factual dispute which couldnot be gone into by this court in exercise of its jurisdiction underArticle 226 of the Constitution of India. His further submission isthat the legal requirement as incorporated under Section 148A ofthe Act is only a prima-facie case for opening of assessment andnot a full fledged enquiry in the matter which otherwise would besubject matter of assessment proceedings. He would furthersubmit that the inference drawn by the authority on the basis ofthe fact that the account in which undisclosed cash deposits ofmore than Rs.19,00,000/- were made itself suggests that theassessee, who is otherwise an NRI, may have many more bankaccounts. He would submit that such an inference taken togetherwith the cash deposit details disclosed during enquiry, by itself, issufficient to validate the impugned order and issuance of noticeunder Section 148 of the Act. We have heard learned counsel for the parties and perusedthe records. After amendment carried out in the income tax under TheFinance Act, 2021, even before proceedings under Section 148 ofthe Act could be drawn, the law requires an order to be passedunder Section 148A of the Act by conducting an enquiry in themanner provided under Section 148A of the Act and satisfaction tobe arrived at on the basis of material available on record thatincome chargeable to tax has escaped assessment for the relevant assessment year. The relevant provisions contained in Section148A of the Act, being relevant, are extracted as below:- “148A. Conducting inquiry providing opportunity before issue of notice under section 148.- TheAssessing Officer shall, before issuing any notice undersection 148,- (a) conduct any enquiry, if required, with the priorapproval of specified authority, with respect to theinformation which suggests that the income chargeableto tax has escaped assessment; (b) provide an opportunity of being heard to theassessee, by serving upon him a notice to show causewithin such time, as may be specified in the notice,being not less than seven days and but not exceedingthirty days from the date on which such notice is issued,or such time, as may be extended by him on the basis ofan application in this behalf, as to why a notice undersection 148 should not be issued on the basis ofinformation which suggests that income chargeable totax has escaped assessment in his case for the relevantassessment year and results of enquiry conducted, ifany, as per clause (a); (c) consider the reply of assessee furnished, if any,in response to the show-cause notice referred to inclause (b); (b) provide an opportunity of being heard to theassessee, by serving upon him a notice to show causewithin such time, as may be specified in the notice,being not less than seven days and but not exceedingthirty days from the date on which such notice is issued,or such time, as may be extended by him on the basis ofan application in this behalf, as to why a notice undersection 148 should not be issued on the basis ofinformation which suggests that income chargeable totax has escaped assessment in his case for the relevantassessment year and results of enquiry conducted, ifany, as per clause (a); (c) consider the reply of assessee furnished, if any,in response to the show-cause notice referred to inclause (b); (d) decide, on the basis of material available onrecord including reply of the assessee, whether or not itis a fit case to issue a notice under section 148, bypassing an order, with the prior approval of specifiedauthority, within one month from the end of the monthin which the reply referred to in clause (c) is received byhim, or where no such reply is furnished, within onemonth from the end of the month in which time orextended time allowed to furnish a reply as per clause(b) expires: Provided that the provisions of this section shall notapply in a case where,- (a) a search is initiated under section 132 or booksof account, other documents or any assets arerequisitioned under section 132A in the case of theassessee on or after the 1[st] day of April, 2021; or (b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissionerthat any money, bullion, jewellery or other valuablearticle or thing, seized in a search under section 132 orrequisitioned under section 132A, in the case of anyother person on or after the 1[st] day of April, 2021,belongs to the assessee; or (c) the Assessing Officer is satisfied, with the priorapproval of the Principal Commissioner or Commissionerthat any books of account or documents, seized in asearch under section 132 or requisitioned under section132A, in case of any other person on or after the 1[st] dayof April, 2021, pertains or pertain to, or any informationcontained therein, [relate to, the assessee; or (d) the Assessing Officer has received any informationunder the scheme notified under section 135A pertainingto income chargeable to tax escaping assessment forany assessment year in the case of the assessee.] Explanation.-For the purposes of this section, specifiedauthority means the specified authority referred to insection 151.] The provision is explicitly clear that the Assessing Officer shall, before issuing any notice under Section 148 of the Act,conduct enquiry, the details of which have been contained in SubClause (a) (b) & (c), which requires seeking prior approval ofspecified authority with respect to the information; providing anopportunity of being heard to the assessee and consideration ofthe reply of the assessee. Sub-Clause (d) of Section 148A of the Act mandates thatafter conducting enquiry by affording an opportunity of hearingand consideration of reply, the authority shall decide, on the basisof material available on record, including reply of the assessee,whether or not it is a fit case for issuance of notice under Section148 of the Act, by passing an order. The expression ‘materialavailable on record’, has been consciously used by the legislatureto put a fetter on the exercise of power in the manner that anorder under Section 148A of the Act deciding to issue notice underSection 148 of the Act can be based only on the basis of materialavailable on record. Sub-Clause (d) of Section 148A of the Act mandates thatafter conducting enquiry by affording an opportunity of hearingand consideration of reply, the authority shall decide, on the basisof material available on record, including reply of the assessee,whether or not it is a fit case for issuance of notice under Section148 of the Act, by passing an order. The expression ‘materialavailable on record’, has been consciously used by the legislatureto put a fetter on the exercise of power in the manner that anorder under Section 148A of the Act deciding to issue notice underSection 148 of the Act can be based only on the basis of materialavailable on record. Therefore, the decision in the enquiry as contemplated underSection 148A of the Act needs to be based on material availableon record. The words ‘material available on record’, in its just, fairand logical interpretation would only mean a tangible material andcan not be interpreted to mean remote likelihood of availability ofmaterial, it being taxing statute, requiring strict construction. The notice which was issued to the petitioner-assessee byinvoking jurisdiction under Section 148A(d) of the Act by theauthority was based on information regarding undisclosed cashdeposits reflected by various transactions, which according to theauthority, was more than Rs.52,00,000/-. However, when thepetitioner-assessee filed his reply, he clearly disclosed that thetotal amount of cash deposits in the bank by him was onlyRs.19,39,000/- and not Rs.52,75,000/- as alleged in the notice.The petitioner-assessee along with his reply annexed completebank statements showing all debit and credit transactions, whichhave also been placed before us. The total transactions, which have been shown, do not exceed the amount as has been statedby the petitioner-assessee. While considering the reply and the bank statements, thecompetent authority did not dispute the transactions, which wereplaced before it along with the reply filed by the petitioner-assessee. Therefore, the very basis of initiation of proceedingsthat income exceeding more than Rs.50,00,000/- had escapedassessment, was factually not correct. But then, the authoritythereafter, without disputing the transactions, proceeded to passan order for issuance of notice under Section 148 of the Act onconjecture, which is reflected from what has been stated in para 6of the impugned order dated 29.03.2022, which is reproducedherein below:- “6. The submission filed by the assessee has beenconsidered under clause (c) of 148A of the Act for A.Y.2015-16 but not found tenable as the assessee hasfurnished copy of one saving account only, there may beone or more account(s) in Corporation Bank in his nameor PAN. Thus, it is logical to conclude that the assessee’sreply is not fully satisfactory with respect to the abovementioned escapement of income in his case for AY2015-16. It is crystal clear from what has been recorded in para 6 ofthe impugned order that though the competent authority did notdispute various transactions meaning thereby that the materialavailable on record, did not show any cash deposits more thanwhat was asserted by the petitioner-assessee, which was far lessthan the amount as stated in the notice under Section 148A (d) ofthe Act, the officer proceeded to hold that there may be one ormore accounts in the Corporation Bank in his name or PAN. It is on this surmise, bereft of any material on record that the authorityseems to justify its action and impugned order dated 29.03.2022. It is crystal clear from what has been recorded in para 6 ofthe impugned order that though the competent authority did notdispute various transactions meaning thereby that the materialavailable on record, did not show any cash deposits more thanwhat was asserted by the petitioner-assessee, which was far lessthan the amount as stated in the notice under Section 148A (d) ofthe Act, the officer proceeded to hold that there may be one ormore accounts in the Corporation Bank in his name or PAN. It is on this surmise, bereft of any material on record that the authorityseems to justify its action and impugned order dated 29.03.2022. The provisions contained in Section 148A (d) of the Actreferred to hereinabove, clearly show that the decision has to betaken on the basis of material available on record. The materialavailable on record before the authority did not disclose any cashdeposit or any other transactions which can be said to haveescaped assessment, which was more than Rs.50,00,000/-. At themost, the exercise could justify the conclusion that the prima-facie, cash transactions and deposits of Rs.19,39,000/- haveescaped assessment. Had it been a case of opening of the case within a period ofthree years having elapsed from the end of the relevantassessment year, the order of the authority could be well justifiedon the touch stone of the legal requirement as embodied underSection 148A of the Act. However, in the present case,undisputedly it is a case where more than three years haveelapsed from the end of the relevant assessment year. In thatcase, in order to initiate proceeding under Sections 148 of the Act,it is not only required to be shown that some income chargeableto tax has escaped assessment, but also that it amounts to or islikely to amount to Rs.50,00,000/- or more than for that year. For this purpose, it is relevant to refer to the provisioncontained in Section 149 (1)(b) of the Act, which is reproducedherein below:- “149. Time Limit for notice.-(1) No notice under section148 shall be issued for the relevant assessment year,- (a)….x…..x…..x…...x (b) if three years, but not more than ten years,have elapsed from the end of the relevant assessmentyear unless the Assessing Officer has in his possessionbooks of account or other documents or evidence whichreveal that the income chargeable to tax, represented inthe form of- (i) an asset; (ii) expenditure in respect of a transaction or inrelation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or islikely to amount to fifty lakh rupees or more:] Provided that no notice under section 148 shall beissued at any time in a case for the relevant assessmentyear beginning on or before 1[st] day of April, 2021, if [anotice under section 148 or section 153A or section 153Ccould not have been issued at that time on account ofbeing beyond the time limit specified under the provisionsof clause (b) of sub-section (1) of this section or section153A or section 153C, as the case may be], as they stoodimmediately before the commencement of the FinanceAct, 2021: Provided further that the provisions of this sub-section shall not apply in a case, where a notice underSection 153A, or section 153C read with section 153A, isrequired to be issued in relation to a search initiatedunder section 132 or books of account, other documentsor any assets requisitioned under section 132A, on orbefore the 31[st] day of March, 2021: Provided also that for the purposes of computingthe period of limitation as per this section, the time orextended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A orthe period during which the proceeding under section148A is stayed by an order or injunction of any court,shall be excluded: Provided further that the provisions of this sub-section shall not apply in a case, where a notice underSection 153A, or section 153C read with section 153A, isrequired to be issued in relation to a search initiatedunder section 132 or books of account, other documentsor any assets requisitioned under section 132A, on orbefore the 31[st] day of March, 2021: Provided also that for the purposes of computingthe period of limitation as per this section, the time orextended time allowed to the assessee, as per show-cause notice issued under clause (b) of section 148A orthe period during which the proceeding under section148A is stayed by an order or injunction of any court,shall be excluded: Provided also that where immediately after theexclusion of the period referred to in the immediatelypreceding proviso, the period of limitation available to theAssessing Officer for passing an order under clause (d) ofsection 148A is less than seven days, such remainingperiod shall be extended to seven days and the period oflimitation under this sub-section shall be deemed to beextended accordingly. Explanation.-For the purposes of clause (b) of thissub-section, “asset” shall include immovable property,being land or building or both, shares and securities,loans and advances, deposits in bank account. [(1A) Notwithstanding anything contained insubsection (1), where the income chargeable to taxrepresented in the form of an asset or expenditure inrelation to an event or occasion of the value referred to inclause (b) of sub-section (1), has escaped theassessment and the investment in such asset or in morethan one previous years relevant to the assessment yearswithin the period referred to in clause (b) of sub-section(1), a notice under section 148 shall be issued for everysuch assessment year for assessment, reassessment orrecomputation, as the case may be.] (2) The provisions of sub-section (1) as to the issueof notice shall be subject to the provisions of section151.] ” Therefore, while passing an order under Section 148A of theAct, the authority is required to reach satisfaction to not only thatincome chargeable to tax has escaped assessment, but in casewhere three years have elapsed from the end of the relevantassessment year, the order under Section 148A of the Act forissuance of notice under Section 148 of the Act could be passed ifthere were no statutory impediment as contained in Section 149Sub-section (1) (b) of the Act, referred to hereinabove. The authority, as is apparent, sought to bridge this statutoryimpediment not on the basis of any material available on recordbut only with the help of a surmise that the assessee may havesome more accounts. Even before this Court, when the reply hasbeen filed by the respondent, no material has been placed to showthat at the time when the authority passed order under Section148A of the Act, there was some material on record that theincome chargeable to tax which escaped assessment amount to oris likely to amount Rs.50,00,000/- or more for that year. On conjoint reading of the provisions contained in Section148A of the Act and what has been provided under Section 149 of The authority, as is apparent, sought to bridge this statutoryimpediment not on the basis of any material available on recordbut only with the help of a surmise that the assessee may havesome more accounts. Even before this Court, when the reply hasbeen filed by the respondent, no material has been placed to showthat at the time when the authority passed order under Section148A of the Act, there was some material on record that theincome chargeable to tax which escaped assessment amount to oris likely to amount Rs.50,00,000/- or more for that year. On conjoint reading of the provisions contained in Section148A of the Act and what has been provided under Section 149 of the Act, it is vividly clear that in order to initiate proceedingsunder Section 148A of the Act, it is not enough that in case wherenotice is proposed to be issued under Section 148 of the Act afterthree years have elapsed from the end of the relevant assessmentyear that there should exist material available on record to reachto conclusion that some income chargeable to tax has escapedassessment, but the amount should be more than Rs.50,00,000/-.Only on the basis that the cash deposits of Rs. 19,39,000/-chargeable to tax have escaped assessment, without anythingmore, the authority was not justified in jumping to the conclusionthat the assessee may have more bank accounts. If such aninterpretation is placed on the provision of Section 148A (d) of theAct with reference to expression ‘material available on record’,then in that case, it will open flood gate and even withoutavailability of any material, the authority would be initiatingproceedings under Section 148 of the Act, which will completelyfrustrate the object of incorporation of Section 148A in the Act. Itis well settled principle of interpretation that the taxing statute is required to be construed strictly. The interpretation as has beensuggested by the learned counsel for the revenue cannot beplaced upon the expression ‘material available on record’ toinclude possibility of collection of any relevant or tangible materialfor opening of proceedings under Section 148A of the Act. Learned counsel for the revenue has placed reliance uponthe decision of the Delhi High Court in the case of Gulmuhar Silk Pvt. Ltd. Versus Income Tax Officer Ward 10 (3), W.P.(C)5787/2022 and CM Appl. 1729/2022, decided on 07.04.2022.The decision in the said case does not apply in the facts andcircumstances of the present case. It is not a case where theassessee is disputing the factual aspects with regard totransactions. Present is a case where the respondent has failed toplacef before the Court any material to suggest that the incomeexceeding Rs.50,00,000/- chargeable to tax has escapedassessment, which would warrant issuance of order under Section148A (d) of the Act followed by issuance of notice under Section148 of the Act. In the result, the impugned order and the proceedings areunsustainable in law. The impugned order and the notices arequashed and set aside. The petition is accordingly allowed. No order as to costs. (SHUBHA MEHTA),J (MANINDRA MOHAN SHRIVASTAVA),J Sanjay Kumawat-1