Catchy v. Assistant Commissioner Of Income Tax And Ors

Signature Not Verified $~S-60 IN THE HIGH COURT OF DELHI AT NEW DELHI +W.P.(C) 13734/2022 & CM APPL.41911/2022 CATCHY PROP-BUILD PRIVATE LIMITED ..... Petitioner Through:Mr.Aditya Ajgaonkar, Advocate withMr.Vikas Jain, Mr.Aviral Saxena andMr.Manjeet Rathod, Advocates.Mr.Vikas Jain, Mr.Aviral Saxena andMr.Manjeet Rathod, Advocates. versus ASSISTANT COMMISSIONER OF INCOME TAX AND ORS ..... Respondents Through:Mr.Puneet Rai, Sr.Standing Counselwith Ms.Adeeba Mujahid, Jr.StandingCounselandMr.NikhilJain,Advocate.with Ms.Adeeba Mujahid, Jr.StandingCounselandMr.NikhilJain,Advocate. Date of Decision: 17[th]October, 2022 % CORAM: HON’BLE MR. JUSTICE MANMOHANHON’BLE MS. JUSTICE MANMEET PRITAM SINGH ARORAJ U D G M E N T MANMOHAN, J: CM APPLs.41912-41913/2022 (exemption) Allowed, subject to all just exceptions. Accordingly, the applications stand disposed of. W.P.(C) 13734/2022 & CM APPL.41911/2022 1.Present writ petition has been filed challenging the show cause noticedated 16[th]March, 2022 issued under Section 148A(b) of the Income TaxAct, 1961 [‘the Act’] as well as the order passed under Section 148A(d) ofthe Act and the notice issued under Section 148 of the Act both dated31[st]March, 2022 for the assessment year 2018-19. 2.Learned counsel for the petitioner states that the impugned showcause notice dated 16[th]March, 2022 was issued under Section 148A(b) ofthe Act seeking to initiate reassessment proceedings against the assessee onaccount of some transactions of purchase and sale of shares undertaken by it.He states that the impugned show cause notice has been issued in violationof the provisions of Section 148A(b) of the Act as it merely states thetransaction entered into by the Petitioner and does not contain any allegationof escapement of income. 3.Learned counsel for the petitioner states that the petitioner filed areply to the show cause notice explaining the aforesaid transactions statingthat the transaction had been recorded in the books of accounts of theassessee and had also been duly declared in the Return of Income. Hefurther states that the petitioner also informed the respondents that thevaluation of the shares of “Bert Marketing Pvt. Ltd.” that had been sold bythe Mr. Anish Malhotra to Manu Garments [now amalgamated with thePetitioner] for a consideration of Rs. 3,09,95,000/- had been done inaccordance with the provisions of Rules 11U and 11UA of the Income TaxRules, 1962 by a qualified Chartered Accountant. 4.He, however, states that the Respondents passed the impugned orderunder Section 148A(d) of the Act on a completely different ground that thecompany Manu Garments was not sound so as to make an investment ofmore than Rs.3 crores and so the source of investment remainedunexplained. He points out that this reason/information was not mentionedin the impugned show cause notice. He contends that the Petitioner was notprovided any proper and effective opportunity to reply to the authorities asthere was no specific charge/allegation/basis in the show cause notice to suggest that income had escaped assessment and the grounds on the basis ofwhich the impugned order has been passed were never put to it before thepassing of the order making it impossible for it to counter the same. 5.Issue notice. Mr.Puneet Rai, learned senior standing counsel for therespondents-revenue, accepts notice. 6.He, on instructions, admits that the impugned show cause noticeissued under Section 148A(b) of the Act is vague. He, on instructions, praysthat the Assessing Officer be given liberty to issue a supplementary noticeunder Section 148A(b) of the Act. In support of his submission, he reliesupon the order passed by this Court in Mahashian Di Hatti Pvt. Limited Vs.Deputy Commissioner of Income Tax, WP(C) 12504/2022 dated 1[st]September, 2022. suggest that income had escaped assessment and the grounds on the basis ofwhich the impugned order has been passed were never put to it before thepassing of the order making it impossible for it to counter the same. 5.Issue notice. Mr.Puneet Rai, learned senior standing counsel for therespondents-revenue, accepts notice. 6.He, on instructions, admits that the impugned show cause noticeissued under Section 148A(b) of the Act is vague. He, on instructions, praysthat the Assessing Officer be given liberty to issue a supplementary noticeunder Section 148A(b) of the Act. In support of his submission, he reliesupon the order passed by this Court in Mahashian Di Hatti Pvt. Limited Vs.Deputy Commissioner of Income Tax, WP(C) 12504/2022 dated 1[st]September, 2022. 7.Having perused the paper book and having heard learned counsel forthe parties, this Court is of the view that in the notice issued under Section148A(b) of the Act, the petitioner was never asked to explain the source offunds that were used by Manu Garments to purchase the shares of BertMarketing Pvt. Ltd. 8.This Court is further of the opinion that if the foundational allegationis missing in the notice issued under Section 148A(b) of the Act, the samecannot be incorporated by issuing a supplementary notice. 9.In the case of Mahashian Di Hatti Pvt. Limited (supra), there was aspecific allegation that the assessee-company had taken accommodationentries of Rs.1,90,84,654/- from twenty eight bogus entities maintained byone Sh.Deepak Nanjyani. Since the foundational allegation was present inthe notice issued under Section 148A(b) of the Act, this Court in the saidcase permitted the Assessing Officer to supply the names of twenty eight Signature Not Verified bogus entities as well as the bank details of one Raj Trading Company.Consequently, the present case is clearly distinguishable from the case ofMahashian Di Hatti Pvt. Limited (supra). 10.Keeping in view the aforesaid, the present writ petition along withapplications is allowed and the show cause notice issued under Section148A(b) of the Act as well as the order passed under Section 148A(d) of theAct and the notice issued under Section 148 of the Act for the assessmentyear2018-19arequashed.However,ifthelawpermits,therespondents/revenue to take further steps in the matter, they shall be atliberty to do so. Needless to state that if and when such steps are taken and ifthe petitioner has a grievance, it shall be at liberty to take its remedies inaccordance with law. MANMOHAN, J MANMEET PRITAM SINGH ARORA, J OCTOBER 17, 2022TS