Agarwal Polysacks Limited, (P.a.n. Number Aabca1578R) v. Principal Commissioner Of Income Tax-I, Aaykarbhawan, Paota C Road, Circle

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Civil Writ Petition No. 6475/2024 Agarwal Polysacks Limited, (P.A.N. Number AABCA1578R),through its Director Amritanjali Agarwal Jain, age 38 years,company with its registered office at E-649, M.I.A., IInd Phase,Basni, Jodhpur - 342005 (Raj.). ----Petitioner Versus 1.Principal Commissioner Of Income Tax-I, AaykarBhawan, Paota C Road, Circle-3, Jodhpur.Bhawan, Paota C Road, Circle-3, Jodhpur. 2.Deputy Commissioner Of Income Tax, Aaykar Bhawan,Paota C Road, Circle-3, Jodhpur.Paota C Road, Circle-3, Jodhpur. 3.Assistant Director Of Income Tax, Aaykar Bhawan, PaotaC Road, Circle-3, Jodhpur.C Road, Circle-3, Jodhpur. 4.Additional Director Of Income Tax (Inv)-Ii, AaykarBhawan, Paota C Road, Circle-3, Jodhpur.Bhawan, Paota C Road, Circle-3, Jodhpur. ----Respondents For Petitioner(s):Mr. Ankur Mathur Ms. Shreshtha Mathur For Respondent(s):Mr. Sunil Bhandari HON'BLE MR. JUSTICE SHREE CHANDRASHEKHAR HON'BLE MR. JUSTICE KULDEEP MATHUR Order 18/07/2024 Per, Hon’ble Shree Chandrashekhar, J : Challenging the order dated 5[th] April 2024 and, in turn, thenotice dated 28[th] March 2024, Agarwal Polysacks Limited hasapproached this Court. 2.The petitioner-company was issued a notice on 28[th] March2024 intimating that the information in possession of the Revenuesuggests that income chargeable to tax for the assessment year 2020-21 escaped assessment within the meaning of section 147 ofthe Income Tax Act 1961. Along with this notice under section148A, the documents in possession of the Revenue were suppliedto the petitioner-company. But before that, on the basis of theverification details an inquiry was conducted and opportunity wasprovided to the petitioner-company to furnish its explanation. Theinquiry report referred to 13 plots sold during the assessment year2020-21 (F.Y. 2019-20) the considerations for which are said tohave been received in cash. The inquiry report further recordedthat 13 plots in Shri Shiv Nagar Daizar, Jodhpur were sold todifferent individuals and the sale deeds were registered between18[th] September 2019 to 14[th] October 2019. The relevant portionsof the inquiry report at page 117 of the paper book are reproduced hereinbelow :- “Investigation in the matter of M/s Agarwal PolysacksLimited was pending with the undersigned.2.It was seen that M/s Agarwal Polysacks Limited sold 13plots in Shri Shiv Nagar, Daizar, Jodhpur during F.Yr. 2019-20 asper details submitted below. All these plots were sold in cash. Opportunity was provided to the assessee company to furnishan explanation in this regard but no explanation has beenfurnished till date. Therefore, the inquiry report is being prepared on the basis of information and documents available with thisoffice. Therefore, the sales consideration of Rs.57,60,112/-received by M/s Agarwal Polysacks Limited for sale ofaforementioned plots remain unexplained. Therefore, addition ofRs.57,60,112/- is proposed to be made in the income of M/sAgarwal Polysacks Limited.” 3.Mr. Ankur Mathur, the learned counsel for the petitioner- Opportunity was provided to the assessee company to furnishan explanation in this regard but no explanation has beenfurnished till date. Therefore, the inquiry report is being prepared on the basis of information and documents available with thisoffice. Therefore, the sales consideration of Rs.57,60,112/-received by M/s Agarwal Polysacks Limited for sale ofaforementioned plots remain unexplained. Therefore, addition ofRs.57,60,112/- is proposed to be made in the income of M/sAgarwal Polysacks Limited.” 3.Mr. Ankur Mathur, the learned counsel for the petitioner- company has raised two-fold contentions, namely, (i) noopportunity of hearing was given to the petitioner-company and(ii) the reply furnished by the petitioner-company was not at allconsidered while arriving at a conclusion that the amount ofRs.57,60,112/- allegedly received in cash is required to bereassessed. In support of his submissions, the learned counselfor the petitioner-company referred the judgments in “P.G.O.Processors Private Limited vs Commissioner, C. Ex.” decided on24[th] January 2000, “Red Chilli International Sales vs. Income TaxOfficer & Anr.” reported in 2023 Live Law (SC) 16 and“Chotanagpur Diocesson Trust Asson. Vs. Union of India” reportedin [2023] 156 taxmann.com 273 (Jharkhand). Per contra, thelearned counsel for the Revenue contended that at the stage ofissuing notice under section 148A(b), the IT Act contemplates alimited inquiry to ascertain the existence of information(s) thatmay suggest that the income chargeable to tax has escapedassessment and the assessee then is given opportunity to raise hisdefence during the assessment proceedings and therefore noprejudice has been caused to the petitioner-company. The learnedcounsel for the Revenue has also referred to the decision“M/s Chetak Enterprises Ltd. Vs. The Assistant Commissioner ofIncome Tax” rendered by a Division Bench of this Court in D.B. Civil Writ Petition No.7062 of 2022 and submits that the issueraised by the petitioner-companystands conclusively decided bythis Court. 4.The requirement of natural justice that is to say providing anopportunity of hearing does not mean that the assessee should begiven personal hearing. The words employed under section148A(b) indicate that the assessee should be afforded anopportunity of being heard by way of show cause notice and apersonal hearing in any form is not contemplated thereunder. Thisis not in dispute that in response to the show cause notice dated28[th] March 2024 the petitioner-company submitted its reply on3[rd] April 2024 a reference of which we find in the order dated5[th] April 2024 at page 128 of the paper book. As to the plea thatthere is no consideration of the stand taken by the petitioner-company in the order dated 5[th] April 2024 by the ACIT, Circle-3,we may indicate that in a quasi-judicial proceeding it is notnecessary that at the interlocutory stage the statutory authoritymust reflect to every stand of the assessee and record hisconsiderations point-wise. Even then, we think that there issufficient consideration of the defence set up by the petitioner-company in the order dated 5[th] April 2024 the relevant portions of which are reproduced below: which are reproduced below: “4.Reply of the assessee:In compliance to the Show Cause Notice, theassessee e-filed its reply dated 03.04.2024, as per para-3,it is admitted that assessee company is owner ofagricultural land measuring 43 Bigha and 6 Biswa locatedat Khasra No.33 and 34, Daijer, Manaklao, Jodhpur, whichwas purchased in year 2008 and mainly submitted that inMarch 2019 the Company authorized it's Director Mrs.Manju Agrawal to take a decision about the land thereafteron 07.06.2019 a Power of Authority (Aam Mukhtiyarnama)was issued by authorized director of the assessee companyIn compliance to the Show Cause Notice, theassessee e-filed its reply dated 03.04.2024, as per para-3,it is admitted that assessee company is owner ofagricultural land measuring 43 Bigha and 6 Biswa locatedat Khasra No.33 and 34, Daijer, Manaklao, Jodhpur, whichwas purchased in year 2008 and mainly submitted that inMarch 2019 the Company authorized it's Director Mrs.Manju Agrawal to take a decision about the land thereafteron 07.06.2019 a Power of Authority (Aam Mukhtiyarnama)was issued by authorized director of the assessee company Mrs. Manju Agrawal in favor of Mr. Kamlesh Kumar DeoraS/o Sh. Ram Prasad Deora r/o-Phoolbagh, Mandore,Jodhpur having PAN: and assessee companyis neither aware of plots sold nor receive any considerationfrom sale of plots as allegedly sold by the power ofattorney holder during the year under consideration. Theassessee also mentioned that a civil suit filed against theassessee company & Sh. Kamlesh Kumar Deora by Sh.Aditya Singhvi & others on 21.06.2019 in connection withsame piece of land at District Court Jodhpur.5. Analysis of assessee's reply & finding of this office: The reply of the assessee was perused and notfound acceptable due to the fact that as per the informationavailable with the department the assessee has sold theplots and received the consideration in cash ; DLC value ofsold plots were Rs.57,60,112 during financial year 2019-20.As per the reply the plots were sold by Mr. Kamlesh KumarDeora S/o Sh. Ram Prasad Deora, who was holder of powerof attorney (Aam Mukhtiyarnama) notarized dated07.06.2019 and all sale deeds were found registered at SubRegistrar-III, Jodhpur. The reply of the assessee is not acceptable as perthe discussion above. The assessee has failed to providesatisfactory reply alongwith documentary evidences to theshow cause notice. The documentary evidences availablewith the department suggests that income chargeable totax has escaped assessment within the meaning of section147 of the Income-tax Act. In this regard it is stated that as per therequirement of section 148A, the department has to be inpossession of information suggesting escapement of incomewhich as per explanation 1 to section 148 means anyinformation in accordance with Risk Management Strategyformulated by Board. "It is pertinent to mention here thatthe only pre-requisite for issuance of notice under section148, is information which suggest escapement of incomeand in this case information has been flagged through HighRisk CRIU/VRU of Insight Portal that income ofRs. 57,60,112/- has escaped assessment as assessee hassold plots in cash and income not offered for taxation.6.Conclusion: The reply alongwith explanation/documentssubmitted by the assessee have been perused and dulyconsidered as discussed above. The assessee has failed tofurnish satisfactory explanation with proper supportingdocuments/ evidences to substantiate his claim/contentionand hence the same cannot be acceptable. 6.1 From the above facts and discussion, it is clearthat the income of Rs.57,60,112/- has escaped assessment during the year under consideration and requires to bebrought to tax.brought to tax. The reply alongwith explanation/documentssubmitted by the assessee have been perused and dulyconsidered as discussed above. The assessee has failed tofurnish satisfactory explanation with proper supportingdocuments/ evidences to substantiate his claim/contentionand hence the same cannot be acceptable. 6.1 From the above facts and discussion, it is clearthat the income of Rs.57,60,112/- has escaped assessment during the year under consideration and requires to bebrought to tax.brought to tax. 6.2. In view of the above, on the basis ofmaterial available on record including reply/compliance ofthe assessee and as per clause (d) of Section 148A of theIncome-tax Act, 1981, I hereby hold that in the case of theassessee income needs to be assessed/re-assessed and isfound to be a fit case for issuance of notice under Section148 of the Income Tax Act, 1961. Thus, in this case, threeyears have not elapsed from the end of the relevant AY i.e.2020-21 as required u/s 149(1)(a) of the Income Tax Act,1961 and as such this is a fit case for issue of notice withthe approval of the specified authority i.e. PrincipalCommissioner of Income-tax-1 Jodhpur as per section 151(I) of the Income-tax Act, 1961. Accordingly this order isbeing passed as per clause (d) of Section 148A of theIncome-tax Act, 1961, after obtaining prior approval of theSpecified Authority i.e PCIT-1, Jodhpur.” 5.By now this is quite a well-settled proposition that thenatural justice is not a mere artifact and cannot fit into any rigidmould. The Court is required to see whether the decision makerhas taken a fair decision and if that is so the form and features ofthe order complained against may not be of much relevance.Therefore, unrealistic expansion of the rules of natural justice andthat too without reference to the administrative realities and otherfactors of a given case can produce undesired results. In“Competition Commission of India Vs. Steel Authority of India Ltd.& Anr.” (2010) 10 SCC 744, the Hon’ble Supreme Court held as under:- 85.Wherever, this Court has dealt with the mattersrelating to complaint of violation of principles of naturaljustice, it has always kept in mind the extent to which suchprinciples should apply. The application, therefore, woulddepend upon the nature of the duty to be performed by theauthority under the statute. Decision in this regard is, infact, panacea to the rival contentions which may be raisedby the parties in a given case. Reference can be made tothe judgment of this Court in the case of Canara Bank vs.Debasis Das.relating to complaint of violation of principles of naturaljustice, it has always kept in mind the extent to which suchprinciples should apply. The application, therefore, woulddepend upon the nature of the duty to be performed by theauthority under the statute. Decision in this regard is, infact, panacea to the rival contentions which may be raisedby the parties in a given case. Reference can be made tothe judgment of this Court in the case of Canara Bank vs.Debasis Das. 86.We may also notice that the scope of duty cast uponthe authority or a body and the nature of the function to bethe authority or a body and the nature of the function to be performed cannot be rendered nugatory by imposition ofunnecessary directions or impediments which are notpostulated in the plain language of the section itself.`Natural justice' is a term, which may have differentconnotation and dimension depending upon the facts of thecase, while keeping in view, the provisions of the lawapplicable. It is not a codified concept, but are well definedprinciples enunciated by the Courts. Every quasi judicialorder would require the concerned authority to act inconformity with these principles as well as ensure that theindicated legislative object is achieved. Exercise of powershould be fair and free of arbitrariness. 6.We would therefore refer to the statutory scheme of the performed cannot be rendered nugatory by imposition ofunnecessary directions or impediments which are notpostulated in the plain language of the section itself.`Natural justice' is a term, which may have differentconnotation and dimension depending upon the facts of thecase, while keeping in view, the provisions of the lawapplicable. It is not a codified concept, but are well definedprinciples enunciated by the Courts. Every quasi judicialorder would require the concerned authority to act inconformity with these principles as well as ensure that theindicated legislative object is achieved. Exercise of powershould be fair and free of arbitrariness. 6.We would therefore refer to the statutory scheme of the “Procedure for Assessment” under Chapter XIV of the IT Act,1961.Section 147 of the IT Act provides that in case where any incomechargeable to tax has escaped assessment for any assessmentyear, the Assessing Officer may assess or re-assess such incomeor re-compute the loss or the depreciation allowances or any otherallowances or deduction for such assessment year subject to theprovisions of sections 148 to 153. The provisions under section148 mandates that the Assessing Officer shall serve on theassessee a notice along with a copy of the order passed, ifrequired, under clause (d) of section 148A before the AssessingOfficer proceeds to make the assessment, re-assessment or re-computation under section 147. It further provides that if a noticeis served upon the assessee, he is required to furnish within threemonths from the end of the month in which such notice wasissued or such further period as may be allowed by the AssessingOfficer to make a return of his income or the income of any otherperson in respect of which he is assessable under the IT Actduring the previous year corresponding to the relevantassessment year. 7.The proviso to section 148 put an embargo on taking actionexcept on fulfilling the conditions provided thereunder. Firstproviso to section 148 provides that no notice shall be issuedunless there is information with the Assessing Officer whichsuggests that the income chargeable to tax has escapedassessment for the relevant assessment year and the AssessingOfficer has obtained prior approval of the specified authority toissue such notice. The Explanation thereof further provides thatthe Assessing Officer may assess or re-assess the income inrespect of any issue which has escaped assessment and suchissue comes to his notice subsequently in the course of theproceedings under section 147, irrespective of the fact that theprovisions of section 148A were not complied with. 8.However, section 148A requires that before the AssessingOfficer decides to issue notice under section 148 he should(a) conduct an inquiry and if necessary with the prior approval ofthe specified authority with respect to the information whichsuggests that the income chargeable to tax has escapedassessment, (b) provide an opportunity of being heard to theassessee by serving upon him a notice to show cause within suchtime as may be specified in the notice but not less than 7 daysand not exceeding 30 days from the date on which such notice isissued or by the extended period if an application is made in thisbehalf, (c) consider the reply of the assessee furnished by him inresponse to the show cause notice referred to in clause-(b) and,(d) take a decision whether or not it is a fit case to issue noticeunder section 148 on the basis of the materials available on recordincluding the reply of the assessee. 9.This is relevant to indicate that under the unamended section147 the Assessing Officer could have initiated assessment/re-assessment proceedings only if he had ‘reasons to believe’ thatthe income chargeable to tax of an assessee has escapedassessment. After the amendment in sections 147 and 148 andinsertion of section 148-A through Finance Act 2021 with effectfrom 01[st] April 2021, the Assessing Officer can initiate aproceeding of assessment/re-assessment on receiving informationand the requirement of having ‘reasons to believe’ has been doneaway with. Explanations (1) & (2) to section 148 of the IT Actexplain the expression “information” on the basis of which theAssessing Officer can proceed under section 148A. In “Union ofIndia & Ors. Vs. Ashish Agarwal” (2023) 1 SCC 617 the Hon’bleSupreme Court held that the Assessing Officer is required toprovide all information and materials to the assessee on which theRevenue seeks to place reliance so as to enable the assessee toeffectively make its defence to the notice under section 148A(b) ofthe Income Tax Act. We find that the inquiry report was uploadedon VRU functionality on Insight portal and, as noticed above, acopy thereof was enclosed with the notice dated 28[th] March 2024.We are of the opinion that a detailed adjudication on the merits ofthe information available with the Assessing Officer and defenceset up by the assessee is not contemplated at the stage of passingan order under section 148A(d). It is true that the AssessingOfficer is required to pass an order which should contain a briefnarration of facts and the defence set up by the assessee, butthen, a conclusive finding as regards the defence taken by theassessee by the Assessing Officer is not required at this stage as the same may prejudice the further proceedings. Moreover, thedetermination made by the Assessing Authority under section 147is otherwise subject to appeal under section 246A of the IncomeTax Act and therefore the merits of the information referable tosection 148A remains subject to the assessment proceedingsinitiated under section 148. In “GKN Driveshafts (India) Ltd. vs.Income Tax Officer & Ors.” 2003 (1) SCC 72, the Hon’ble SupremeCourt held that when a notice under section 148 of the IncomeTax Act is issued the proper course of action for the assessee is tofile return. 10.The decision in “P.G.O. Processors Private Limited Vs.Commissioner, C. Ex.” deals with the issue whether the assesseecan insist on supply of authenticated copy of the document oropportunity to inspect the document may serve the purpose, or, ifdesired, obtain a photocopy thereof. The decision in “ChotanagpurDiocesson Trust Asson. Vs. Union of India” is also distinguishableon facts in as much as after issuing a notice under section148A(b) of the IT Act, the Revenue started gathering informationand the supporting documents. “Red Chilli International Sales Vs.Income Tax Officer & Anr.” is a decision on the point that normallythe writ petition should not be held not maintainable in view of thealternative remedy available to the assessee particularly becausethe provisions for re-opening the assessment have undergonechanges after the Finance Act, 2021. Quite evidently, theaforementioned decisions do not provide any foundation to thepetitioner-company to challenge the order passed under section148A(d) of the IT Act. 11.The petitioner-company in its reply set up a defence that ithas no knowledge about sale of 13 plots by Mr. Kamlesh KumarDeora who was given a power of attorney on 7[th] June 2019 byMrs. Manju Agarwal. She was authorized by the petitioner-company to take a decision about the lands situated at khasraNo.33 measuring about 1 bigha and 2 biswa and khasra No.34measuring about 8 bigha and 18 biswa. The petitioner-companyreferred also to a civil suit filed against it in the Jodhpur DistrictCourt filed by Aditya Singhvi and others for an injunction andorder against it seeking restraint not to transfer the subjectproperty comprised under khasra nos.33 and 34 at Daizar,Manaklao and Jodhpur. It is stated that the District Court by anorder dated 25[th] June 2019 restrained the petitioner-companyfrom making any further sale/alienation of the suit property. Thepetitioner-company took a stand that on account of the fraudulentactivity of the power of attorney holder the sale-deeds executedby him shall not amount to sale of the property by the petitioner-company. Though the petitioner-company states that it came to itsknowledge that sale-deeds are executed by Mr. Kamlesh KumarDeora, still, it claims that it is in peaceful possession of the subjectproperty. There is also a reference of a contempt petition filedagainst the power of attorney holder and the petitioner-companyhas taken a position in paragraph No.14 of its reply dated 3[rd] April2024 that it did not take any action against the power of attorneyholder because the sale-deeds executed by him are null and void. 12.The law relating to the power of attorney is governed by theprovisions of the Powers of Attorney Act, 1882 and it is well-settled that an agent acting under the power of attorney always acts in the name of his principal and any document executed orthing done by an agent on the basis of power of attorney is aseffective as if executed or done by the principal himself. In “Stateof Rajasthan & Ors. Vs. Basant Nahata” 2005 (12) SCC 77, theHon’ble Supreme Court held that through a power of attorney, anagent is formerly appointed to act for the principal for one or aseries of transactions or to manage the affairs of the principal. Wemay also refer to “Suraj Lamp and Industries Pvt. Ltd. Vs. State ofHaryana” 2012 (1) SCC 656 wherein the Hon’ble Supreme Courtheld that a power of attorney is not an instrument of transfer inregard to any right, title or interest in an immovable property andit is just a creation of an agency whereby the donor authorizes thedonee to do the acts specified therein on his behalf and when apower of attorney is executed that shall bind the grantor as if theact was done by himself (refer, section 1-A and section 2 of thePower of Attorney Act 1882). 13.It is well-known that a power of attorney is a document ofconvenience and except in cases where a power of attorney iscoupled with interest, it is revocable. No doubt the power ofattorney holder acts in a fiduciary capacity but any act of infidelityor breach of trust shall necessarily be a matter between the donorand the donee. In that event, the remedy of the petitioner-company shall lie elsewhere and not before the writ Court byraising such a technical plea. In “Tmt. Kasthuri Radhakrishnan &Ors. Vs. M.Chinniyan & Anr.” 2016 (3) SCC 296, the Hon’bleSupreme Court held that any act or thing done by the agent onthe strength of power of attorney is never construed and/ortreated to have been done by the agent in his personal capacity so 13.It is well-known that a power of attorney is a document ofconvenience and except in cases where a power of attorney iscoupled with interest, it is revocable. No doubt the power ofattorney holder acts in a fiduciary capacity but any act of infidelityor breach of trust shall necessarily be a matter between the donorand the donee. In that event, the remedy of the petitioner-company shall lie elsewhere and not before the writ Court byraising such a technical plea. In “Tmt. Kasthuri Radhakrishnan &Ors. Vs. M.Chinniyan & Anr.” 2016 (3) SCC 296, the Hon’bleSupreme Court held that any act or thing done by the agent onthe strength of power of attorney is never construed and/ortreated to have been done by the agent in his personal capacity so as to create any right in his favor but is always construed ashaving been done by the principal himself. This is well settled inlaw that the powers under Article 226 of the Constitution of Indiaare discretionary in nature and the writ Court must remain mindfulwhether the relief sought falls within the realm of private law orpublic law domain. The jurisdiction conferred on the High Courtunder Article 226 is no doubt very wide but it is an acceptedprinciple that the High Court exercises its jurisdiction under Article226 of the Constitution of India for a public law remedy and it isavailable against a body or person performing public law function.The stand taken by the petitioner-company that it had noknowledge about the sale transaction by the power of attorneyholder is not a ground for the Revenue not to proceed against it.The petitioner-company shall be bound by the doctrine of agencyand whatever act the power of attorney has done on his behalf byvirtue of the power of attorney dated 07[th] June 2019 shall bind thepetitioner-company. This is another issue to say that the power ofattorney holder acted beyond the power authorized to him and,then in that case, the dispute shall be between the petitioner-company and the power of attorney holder. 14.For the foregoing reasons, we find no merits in this case and,therefore, D.B. Civil Writ Petition No. 6475/2024 is dismissed. (KULDEEP MATHUR),J (SHREE CHANDRASHEKHAR),J 2-AjaySingh