Mahaveer Jain v. Income Tax Officer, Ward-1(2), Aaykar Bhawan, Rani Bazarbikaner, Rajasthan

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Civil Writ Petition No. 10306/2023 Mahaveer Jain S/o Kundan Mal Minni, Aged About 36 Years, R/oM/s Kundan Mal Mahaveer And Co. Near Chitra Ice Factory,Bhinasar, Bikaner - 334303 ----Petitioner Versus Income Tax Officer, Ward-1(2), Aaykar Bhawan, Rani BazarBikaner, Rajasthan 334001 ----Respondent For Petitioner(s) : Mr. Aditya Vijay through V.C.Mr. Pankaj AroraFor Respondent(s): Mr. K.K. Bissa HON'BLE THE CHIEF JUSTICE MR. MANINDRA MOHAN SHRIVASTAVA HON'BLE MR. JUSTICE MUNNURI LAXMANReportableOrder 13/02/2024 1.Aggrieved by the reopening of the assessment for theassessment year 2019-20, vide impugned order dated 29.03.2023passed by the ITO Ward-1(2), BKN in exercise of powers conferredunder Section 148A(d) of the Income Tax Act, 1961, the petitionerhas filed this writ petition. Consequential notice under Section 148of the Act, has also been assailed. 2.Quint essential facts, necessary for determination of thecause and controversy raised in this petition, as succinctly statedin the writ petition, are that the petitioner is an individualassessee and for the year under consideration i.e. the assessmentyear 2019-20, he filed return of income declaring his income asRs.6,17,070/- on 2[nd] October, 2019. A notice under Section 148A(b) of the Act, however, came to be issued on 14.03.2023 on the basis of the alleged information received from DDIT (Inv.),Mumbai that the petitioner opted accommodation entries ofRs.50,00,000/- through Allbright Electricals Pvt. Ltd. A reply wassubmitted by the petitioner in which the petitioner sought toexplain that he had not made any such transaction with M/sHubtown Limited or Mahavir Chand Duggar and he has not takenany loan from Allbright Electricals Pvt. Ltd. but has given advanceto the Allbright Electricals Pvt. Ltd. in the month of November,2018 amounting to Rs.65,00,000/- and that was duly paid back ininstallments in the month of January, 2019 and March, 2019.Petitioner’s further case was that Allbright Electricals Pvt. Ltd. wasnot managed by Mahavir Chand Duggar but is run by Vinod andSunita Singhvi. The petitioner also asserted that AllbrightElectricals Pvt. Ltd. is not a share company and the same is a non-banking financial corporation and the same is a licensed NBFC.Various documentary evidence were also annexed with the replyand request was made to provide copies of the statements ofMahavir Chand Duggar and all other documentary evidence reliedupon by the authorities to come to the conclusion that petitionerhad taken alleged accommodation entries. Petitioner also referredto the notification dated 01.08.2022, issued by CBDT, mandatingRevenue to provide information received from the informationwing, as also the documents required by the petitioner. 3.However, vide order dated 29.03.2023, the ITO concernedrecorded opinion that Rs.50,00,000/-, alleged to be transacted,involved the petitioner and Allbright Electricals Pvt. Ltd., did notform part of the return submitted by the petitioner and, therefore,for that reason, the income of Rs.65,00,000/-, chargeable to tax, has escaped assessment in the return filed by assessee for theassessment year 2019-20. 3.However, vide order dated 29.03.2023, the ITO concernedrecorded opinion that Rs.50,00,000/-, alleged to be transacted,involved the petitioner and Allbright Electricals Pvt. Ltd., did notform part of the return submitted by the petitioner and, therefore,for that reason, the income of Rs.65,00,000/-, chargeable to tax, has escaped assessment in the return filed by assessee for theassessment year 2019-20. 4.Learned counsel for the petitioner contended before us thatthe order impugned not only suffers from procedural improprietybut also error of law and fact both. Learned counsel, elaboratinghis submissions, would contend that though the notice underSection 148 A (b) discloses information, all the documents andmaterial records wherefrom such information was extracted andcollected, were not supplied to the petitioner which violatedmandate of the circular dated 01.08.2022. He would submit thatthe statements of persons, excel-sheets and all other documentswhich form material basis to initiate proceedings on the basis ofthe information derived from aforesaid statements anddocuments, were bound to be supplied to the petitioner. 5.Next submission of learned counsel for the petitioner is thatthe petitioner had also prayed for personal hearing, which was notafforded to him. Once the petitioner had specifically asked forpersonal hearing, the authority was duty bound to afford anopportunity of hearing in which the petitioner could have satisfiedthe authority that present was not a case of reopening theassessment. This opportunity, having been denied, the impugnedorder apart from various illegalities pointed out, suffers fromviolation of principles of natural justice and fairness. 6.Next submission of learned counsel for the petitioner is thatthe impugned order is mechanical, non-speaking and withoutconsideration of the material objections raised by the petitioner.He would submit that except quoting, the objections raised by thepetitioner, the competent authority has only performed formality and has not met out any of the objections by giving reasons,much less weighty reasons, as to why the objections were notsustainable. He would submit that the ITO concerned hadcompletely pre-judged the issue. He did not apply his mind to theadmitted facts on the record that the banking transaction detailsclearly disclose the details of transaction between the petitionerand Allbright Electricals Pvt. Ltd. and that it was not a case of anyaccommodation entries but a case of advance made available bythe petitioner to Allbright Electricals Pvt. Ltd., which was later onrepaid in installments. In support of his submissions, learnedcounsel for the petitioner relied upon the decisions of various HighCourts in the cases of Anwar Mohammed Shaikh Vs. AssistantCommissioner of Income Tax [(2023) 292 Taxman414(Bombay)], Sru Steels Ltd. Vs. Income Tax Officer[(2023) 150 taxmann.com 121 (Delhi)], Yuva Trading Co.(P.) Ltd. Vs. Income Tax Officer [(2023) 292 Taxman 598(Gujarat)], Krishna Diagnostic (P.) Ltd. Vs. Income TaxOfficer, Ward 143 [(2023) 151 taxmann.com 499 (Delhi)],Alkem Laboratories Ltd. Vs. Principal Commissioner ofIncome Tax [(2023) 152 taxmann.com 133(Patna)] andPackirisamy Senthilkumar Vs. Government of India [(2023)153 taxmann.com 640 (Madras)]. 7.Per contra, learned counsel for the respondents wouldsubmit that upon receipt of information from DDIT (Inv.) Mumbairegarding a heavy transaction having taken place between thepetitioner and Allbright Electricals Pvt. Ltd. and that it was notreflected in the income tax return of the petitioner, the informationwas supplied to the petitioner by issuing him a notice under 7.Per contra, learned counsel for the respondents wouldsubmit that upon receipt of information from DDIT (Inv.) Mumbairegarding a heavy transaction having taken place between thepetitioner and Allbright Electricals Pvt. Ltd. and that it was notreflected in the income tax return of the petitioner, the informationwas supplied to the petitioner by issuing him a notice under Section 148 A (b) of the Act. The petitioner was afforded dueopportunity of hearing. The petitioner submitted his reply whichwas duly considered and only thereafter, the ITO concerned haspassed the order of reopening assessment followed by noticeunder Section 148 of the Act. He would submit that at this stage,there is no determination regarding taxability that the entireamount of Rs.65,00,000/- is liable to taxation but it is only theexercise of reopening assessment, as the aforesaid amountescaped assessment. He would further argue that all theobjections which are being raised herein are to satisfy theauthority and the Court that the aforesaid amount had escapedassessment is not taxable in nature. Learned counsel for theRevenue would submit that those arguments, will receiveconsideration in accordance with law during reassessmentproceedings, where the petitioner will get full opportunity tosatisfy the Assessing Authority during the reassessmentproceedings as to why the income which escaped assessmentshould not be taxed. He would further submit that once thepetitioner admits that he has not disclosed the aforesaidtransaction in the income tax return, the jurisdiction is arrived atto reopen assessment in exercise of powers under Section 148A ofthe Income Tax Act and, therefore, merely because supply ofdocuments and personal hearing have not taken place, in thepeculiar circumstances of the present case, challenge to the orderis not sustainable in law. Learned counsel for Revenue placesreliance on the Division Bench judgment of this Court in the caseofM/s Chetak Enterprises Ltd. Vs. The Assistant Commissioner of Income Tax [D.B. Civil Writ PetitionNo.7062/2022]. 8.We have heard and perused the records and given anxiousconsideration of the respective submissions made by learnedcounsel for the parties. 9.A perusal of the notice under Section 148 A (b) of the Actreveals that the basis for issuance of notice was receipt ofinformation from DDIT (Inv.) with regard to a heavy transactionhaving taken place between the petitioner and one AllbrightElectricals Pvt. Ltd. It further reveals that a search action underSection 132 of the IT Act was conducted by the office of DDIT(Inv.), Mumbai on M/s Hubtown Limited Ltd on 30.07.2019. As perthe search proceedings, statement of Mr. Mahaveer Duggar wasrecorded on oath. Data backup of laptop and iphone in possessionof Mahaveer Duggar were also collected. In the laptop, someexcel-sheets were found in which names of various entities werefound. Notice further says that Shri Mahaveer Duggar confirmedthat the excel-sheets in the laptop contain details ofaccommodation entries provided by him to various beneficiaries inthe form of unsecured loan. The aforesaid information includes theinformation regarding the petitioner also having takenaccommodation entries of Rs.50,00,000/- through AllbrightElectricals Pvt. Ltd (operated by entry provider Mr. MahaveerDuggar) in the form of unsecured loan. The notice clearly statedthat when the ITR for the assessment year 2019-20 was perusedit was seen that the petitioner had not shown any transactionmade with Allbright Electricals Pvt. Ltd. or Mr. Mahaveer Duggar inhis audit report/ITR. 10.On the above basis, the ITO prima facie opined that theaforesaid transaction remained unexplained from ITR and otherfinancial statements filed by the petitioner. 10.On the above basis, the ITO prima facie opined that theaforesaid transaction remained unexplained from ITR and otherfinancial statements filed by the petitioner. 11.It would thus be seen that the basis of initiating notice underSection 148A(b) was information regarding transaction betweenthe petitioner and Allbright Electricals Pvt. Ltd. Section 148A(a)provides that the Assessing Officer shall, before issuing any noticeunder Section 148, conduct an enquiry, if required, with the priorapproval of the specified authority, with respect to the informationwhich suggests that income chargeable to tax has escapedassessment. The Assessing Officer initiated enquiry with regard tothe information, as contained in the annexure appended to thenotice, and elaborately dealt with, which is referred to hereinabove. The information, in our opinion, taken as it is, definitelysuggests that the income chargeable to tax has escapedassessment. Use of the word “suggest” denote the legislativeintent that that no conclusion at that stage is required to bearrived at but only a prima facie consideration is necessary toinitiate proceedings under Section 148A. The materials, whichhave been disclosed, can neither be said to be patently false,much less irrelevant or extraneous to the relevant assessmentyear and the transactions made by the petitioner. 12.The petitioner was given an opportunity of being heard.Though number of grounds were urged by the petitioner, apartfrom his demand for supply of various documents and materialfrom which the information was collected and shared with thepetitioner, they are more in the nature of explaining thetransaction to say that the transaction amount of Rs.50,00,000/- was not taxable. However, this is not the stage where assessmenthas to be carried out. The Assessing Authority, at this stage ofmaking enquiry under Section 148A, does not make anyassessment but the purpose of enquiry is to find out whether anyincome chargeable to tax has escaped assessment. That being thelimited object and purpose of enquiry under Section 148A of theAct, by its very nature, the purpose of enquiry is only to find outwhether a case for reassessment is made out or not and notwhether any stated amount is liable to tax because that issuewould be examined in detail at the stage of reassessmentproceedings. 13.Clause (d) of Section 148A clearly reveals that after receiptof reply in response to the notice under Clause (b), the AssessingOfficer is required to decide, on the basis of material available onrecord, including the reply of the assesse, whether or not it is a fitcase to issue notice under Section 148. Therefore, the enquiryunder Section 148A is intended to decide whether a case ofreopening of assessment is made out or not. Therefore, from thevery nature of the enquiry contemplated under Section 148A, itcannot be said that a detailed enquiry and minute examinationand scrutiny of each and every material on record and hearing tothe assessee is necessary at this stage. Once the informationwhich suggests that income chargeable to tax has escapedassessment, a case for reopening of the assessment is made out. 14.We would have appreciated the submission of learnedcounsel for the petitioner regarding non-affording of opportunity oforal hearing and also non-supply of certain documents, whichwere made basis for information appended to notice under Clause 14.We would have appreciated the submission of learnedcounsel for the petitioner regarding non-affording of opportunity oforal hearing and also non-supply of certain documents, whichwere made basis for information appended to notice under Clause (b) but for the admission on the part of the petitioner that thetransaction in dispute was not reflected in the ITR/audit of thepetitioner, though learned counsel for the petitioner sought toexplain it by saying that the bank details discloses thosetransactions between the petitioner and Allbright Electricals Pvt.Ltd. Once it is admitted that heavy transaction has been madebetween the petitioner and Allbright Electricals Pvt. Ltd. and thesame having not been disclosed in the return of income/audit, it isclear that the aforesaid transaction amounts to escaped incomefor the relevant assessment year. Therefore, in our opinion,admission of the petitioner himself makes out a case for reopeningof the assessment under Section 148. Though the reasons whichhave been assigned by the Assessing Officer in the orderimpugned are brief in nature, it cannot be said that the order isnon-speaking or mechanical in nature. Non-disclosure of heavytransaction by the petitioner with Allbright Electricals Pvt. Ltd., inthe ITR/Audit and the same having been made a basis to reopenassessment by issuing notice under Section 148, cannot betermed as arbitrary, whimsical or perverse, so as to warrantinterference by this Court in exercise of jurisdiction under Article226 of the Constitution of India. 15.The decisions, which have been cited by the petitioner, aredistinguishable on facts. Present is a case where party hadaccepted that certain transactions had escaped assessment. Incase of serious dispute with regard to the information ortransaction having escaped assessment, non-affording ofopportunity of hearing or non-supplying documents, was held tobe unfair, arbitrary and unsustainable in law and relief was provided. The judgments cited at the bar by the petitioner are,therefore, distinguishable on facts. 16.A Division Bench of this Court in the case of M/s ChetakEnterprises Ltd.(supra) (in which one of us, M.M. Shrivastava, J.was a party), while dealing with almost a similar issue onsomewhat similar factual background, noted legal position asenumerated in various decisions of the Hon’ble Supreme Court,this Court and other High Courts. “12. In 'Rasulji Buxji Kathawala vs. Income TaxCommissioner, Delhi and another' (Civil Writ No.44of 1955, dated 2.4.1956) while dealing with thesimilar situation under the 1922 Act, Division Bench ofthis Court held that- “But where as in this case no part of the Act isbeing attacked, there is, in our opinion, nojustification for us to intervene at this stagewhen other remedies which arc not necessarilyonerous are still open to the applicant under theAct. We, therefore, refuse to intervene at thisstage in this case, and leave it to the applicantto pursue his remedies under the Income-taxAct so far as the question of his charge-ability toincome-tax under the Act, or other matters areconcerned.” 13.While dealing with the similar situation under theold Act i.e. Indian Income Tax Act, 1922, Division Benchof the Punjab and Haryana High Court in 'LachhmanDas Nayar and others vs. Hans Raj Puri, Income-Tax Officer, Amritsar and others,1953 AIR (P&H)55, held that- “But where as in this case no part of the Act isbeing attacked, there is, in our opinion, nojustification for us to intervene at this stagewhen other remedies which arc not necessarilyonerous are still open to the applicant under theAct. We, therefore, refuse to intervene at thisstage in this case, and leave it to the applicantto pursue his remedies under the Income-taxAct so far as the question of his charge-ability toincome-tax under the Act, or other matters areconcerned.” 13.While dealing with the similar situation under theold Act i.e. Indian Income Tax Act, 1922, Division Benchof the Punjab and Haryana High Court in 'LachhmanDas Nayar and others vs. Hans Raj Puri, Income-Tax Officer, Amritsar and others,1953 AIR (P&H)55, held that- “An examination of the scheme of the Act andthe words used in section 34 of the Act and thevarious cases that I have referred to above showthat the legislature has entrusted thedetermination of facts and of law to the Income-tax Officers. Aparticular machinery has been setup under the Act “by the use of which alone”total assessable income for the purposes of theIncome-tax is to be ascertained and jurisdictionto question the assessment otherwise than bythe use of this machinery is incompatible withthe scheme of the Act. The challenge of theaction of the Income-Tax Officer by a writ prohibition or mandamus is, therefore, notavailable to the assessee.” 14.The Division Bench of the Punjab and Haryana HighCourt in the case of 'Sumit Passi vs. AssistantCommissioner of Income-Tax', (2016) 386 ITR,held that- “29.... The reasons assigned by the AssessingOfficer to tentatively believe that taxable incomehas escaped assessment cannot be brushedaside at the threshold without a fact findingprocedure, more so when the petitioners are notremediless and have got equally efficaciousrecourses under the Act. 30. A somewhat similar dictum is discerniblefrom CIT v. Chhabil Dass Agarwal [2014] 1 SCC603 as it holds that the Act provides completemachinery for the assessment/reassessment oftax, imposition of penalty and for obtaining reliefin respect of any improper orders passed by theRevenue Authorities, and the assessee could notbe permitted to abandon that machinery and toinvoke the jurisdiction of the High Court underArticle 226 of the Constitution when he hadadequate remedy open to him by an appeal tothe Commissioner of Income-tax (Appeals). 31.Having held so, it is not expedient for thisCourt to express its opinion on the rivalsubmissions as it may unwittingly causeprejudice to either party. Suffice it to say thatno case to quash the notice(s)issued undersection 148 read with Section 147 of the Act orthe order(s) rejecting the objections, is made out at this premature stage.” 15.The Delhi High Court in W.P.(C) 5787/2022titled as Gulmuhar Silk Pvt. Ltd. vs. Income TaxOfficer Ward10(3) Delhi, while considering the samequestion held that: “6.Though it is the petitioner's case that theimpugned order is erroneous on facts, yet thisCourt is of the opinion that the petitioner wouldhave ample opportunity during the course ofproceedings before different statutory forums toshow that the finding of fact arrived at waserroneous. Moreover, at this stage, noassessment order has been passed and it hasonly been observed that it is a fit case forissuance of notice under Section 148 of the Act.Infact, the Supreme Court in Commissioner ofIncome Tax and Ors. Vs. Chhabil Das Agarwal,(2014) 1 SCC603 has held that as the IncomeTax Act, 1961provides complete machinery forassessment/reassessment of tax, assessee is not permitted to abandon that machinery and invokejurisdiction of High Court under Article 226.” “6.Though it is the petitioner's case that theimpugned order is erroneous on facts, yet thisCourt is of the opinion that the petitioner wouldhave ample opportunity during the course ofproceedings before different statutory forums toshow that the finding of fact arrived at waserroneous. Moreover, at this stage, noassessment order has been passed and it hasonly been observed that it is a fit case forissuance of notice under Section 148 of the Act.Infact, the Supreme Court in Commissioner ofIncome Tax and Ors. Vs. Chhabil Das Agarwal,(2014) 1 SCC603 has held that as the IncomeTax Act, 1961provides complete machinery forassessment/reassessment of tax, assessee is not permitted to abandon that machinery and invokejurisdiction of High Court under Article 226.” 16.Recently, a Division Bench of this Court in the caseof Laxmi Meena vs. Union of India & Ors. [D.B.Civil Writ Petition No.447/2023, decided on15.02.2023] held that in the matter of challenge toorder passed under Section 148A of the Act followed byissuing notice under Section 148 of the Act, thepetitioner had not alleged any procedural impropriety,irregularity or violation of statutory provisions in thematter of initiation of proceedings or passing of anyorder under Section 148A(d) of the Act. The DivisionBench relied upon the order passed by the High Court ofPunjab and Haryana in the case of Anshul Jain vs.PrincipalCommissionerofIncomeTax[CWPNo.10219/2022, decided on 02.06.2022]. It was held as under: “8.Thus, the consistent view is that where theproceedings have not even been concluded bythe statutory authority, the writ Court should notinterfere at such a pre-mature stage. Moreover itis not a case where from bare reading of notice itcan be axiomatically held that the authority hasclutched upon the jurisdiction not vested in it.The correctness of order under Section 148A(d)is being challenged on the factual premisecontending that jurisdiction though vested hasbeen wrongly exercised. By now it is well settledthat there is vexed distinction betweenjurisdictional error and error of law/fact withinjurisdiction. For rectification of errors statutoryremedy has been provided.” 17.The SLP preferred against the order passed in thecase of Anshul Jain (supra), was dismissed by Hon’bleSupreme Court vide order dated 02.09.2022 whichreads as under: “1.What is challenged before the High Courtwas there-opening notice under Section 148A(d)of the Income Tax Act, 1961. The notices havebeen issued, after considering the objectionsraised by the petitioner. If the petitioner has anygrievance on merits thereafter, the same has tobe agitated before the Assessing Officer in the re-assessment proceedings. 2.Under the circumstances, the High Courthas rightly dismissed the writ petition.has rightly dismissed the writ petition. 3.No interference of this Court is called for.4.The present Special Leave Petition stands4.The present Special Leave Petition stands dismissed. 5.Pending applications stand disposed of.” 18.The Division Bench taking into consideration thesettled legal position, dismissed the petition givingliberty to the writ petitioner to avail the remedy in the proceedings subsequent to notice under Section 148 ofthe Act.” 17.In view of the above detailed consideration, in our opinion,no case is made out for interference at this stage. 2.Under the circumstances, the High Courthas rightly dismissed the writ petition.has rightly dismissed the writ petition. 3.No interference of this Court is called for.4.The present Special Leave Petition stands4.The present Special Leave Petition stands dismissed. 5.Pending applications stand disposed of.” 18.The Division Bench taking into consideration thesettled legal position, dismissed the petition givingliberty to the writ petitioner to avail the remedy in the proceedings subsequent to notice under Section 148 ofthe Act.” 17.In view of the above detailed consideration, in our opinion,no case is made out for interference at this stage. 18.We may, however, hasten to add here that we have notcommented on the merits of the assessment. All the submissionswhich have been made by the petitioner before this Court tosubmit that transacted amount of Rs.65,00,000/- is not taxable innature, would be open to be raised by the petitioner at theappropriate stage in the reassessment proceedings. The AssessingOfficer, in the reassessment proceedings, shall be duty bound todeal with all those submissions which have been made before uswith regard to the nature of transactions involving Rs.65,00,000/-between the petitioner and Allbright Electricals Pvt. Ltd.Furthermore, the documents, if needed by the petitioner, shallhave also to be supplied to him so that he gets full opportunity tosatisfy the Assessing Officer as to why addition of income shouldnot be made. 19.With the aforesaid observations, the writ petition is disposedoff. (MUNNURI LAXMAN),J (MANINDRA MOHAN SHRIVASTAVA),CJ 5-jayesh/-