M/S Chetak Enterprises Ltd., Petch Area, Circuit House Road,Opp. Dak Bungalow, Nimbahera, District Chittorgarh, Rajasthanthrough Chief Financial Officer Manoj L v. The Assistant Commissioner Of Income Tax, Central Circle

HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR D.B. Civil Writ Petition No. 7062/2022 M/s Chetak Enterprises Ltd., Petch Area, Circuit House Road,Opp. Dak Bungalow, Nimbahera, District Chittorgarh, RajasthanThrough Chief Financial Officer Manoj Lodha. ----Petitioner Versus The Assistant Commissioner Of Income Tax, Central Circle-1,Udaipur, Mumal Tower, Saheli Marg, Udaipur, Rajasthan. ----Respondent For Petitioner(s) : Mr. R.V. Eswar, Sr. Adv. assisted byMr. Piyush Goyal, through V.C.Mr. Piyush Goyal, through V.C.For Respondent(s): Mr. K.K. Bissa HON'BLE ACTING CHIEF JUSTICE MR. MANINDRA MOHAN SHRIVASTAVA HON'BLE MR. JUSTICE KULDEEP MATHUR Judgment REPORTABLE20/03/2023 Heard on admission. 2.Learned senior counsel for the petitioner argued that re-opening of the assessment in respect of assessment year 2018-2019 is illegal, without jurisdiction and void ab initio. Theprincipal submission of the learned senior counsel for thepetitioner is that the petitioner had submitted its return of incomefor the assessment year 2018-2019 and regular assessment orderwas passed as scrutiny assessment under Section 143(3) of theIncome Tax Act, 1961 (hereinafter referred to as ‘the Act’) by theassessing authority on 15.07.2021. The return of income wasfiled by the assessee under Section 139 of the Act on 30.10.2018 declaring its income of Rs.42.44 crores along with tax audit reportunder Section 44AB of the Act and the assessment in terms ofSection 115JB of the Act was completed by the assessingauthority, who also made addition by ad hoc disallowance ofcertain expenses. 3.A notice under Section 148A(b) of the Act was issued on10.03.2022 providing an opportunity of hearing against proposedre-opening of the assessment on receipt of information based onsearch and survey action under Section 132 and 133 of the Actconducted on M/s APCO Infratech Private Limited and otherassociates on 15.09.2021 by DDIT (Investigation) Unit-4(4)Mumbai. As the re-opening was without the authority of law, thepetitioner submitted a detailed reply by stating that at the timewhen original assessment was carried out, all books of accounts,relevant documents, informations including the informationrelating to all transactions between the petitioner M/s ChetakEnterprises Limited and M/s. APCO Infratech Private Limited weredisclosed and only after due consideration of the entire materials,assessment order was passed. 4.The submission of the learned senior counsel for thepetitioner is that merely because a search and survey wasconducted on M/s. APCO Infratech Private Limited, it could notprovide a basis for the respondents to re-open assessment byinvoking provisions contained under Section 148A and 148 of theAct. 5.On the other hand, learned counsel for the respondent wouldsubmit that though the petitioner was subjected to scrutinyassessment and the original order of assessment was passed on 15.07.2021 on the basis of the declared income of Rs.42.44crores, subsequent thereto, during a search and survey conductedon M/s. APCO Infratech Private Limited, it was prima facierevealed that various transactions between the petitioner and M/s.APCO Infratech Private Limited were found to be in the nature ofcircular transactions by engaging in raising fake invoices.Therefore, power under section 148A of the Act was invoked,opportunity of hearing was afforded and a detailed order underSection 148A(d) of the Act was passed after due consideration ofthe reply of the petitioner. 5.On the other hand, learned counsel for the respondent wouldsubmit that though the petitioner was subjected to scrutinyassessment and the original order of assessment was passed on 15.07.2021 on the basis of the declared income of Rs.42.44crores, subsequent thereto, during a search and survey conductedon M/s. APCO Infratech Private Limited, it was prima facierevealed that various transactions between the petitioner and M/s.APCO Infratech Private Limited were found to be in the nature ofcircular transactions by engaging in raising fake invoices.Therefore, power under section 148A of the Act was invoked,opportunity of hearing was afforded and a detailed order underSection 148A(d) of the Act was passed after due consideration ofthe reply of the petitioner. 6.In the present case, what we find is that though initially atthe time of scrutiny assessment under Section 143(3) of the Actby the assessing authority on 15.07.2021, assessment was madeon the basis of the declared income of Rs.42.44 crores, as isevident from notice under Section 148A(b) of the Act, on15.09.2021, a search and survey action under Section 132 and133 of the Act was conducted on M/s. APCO Infratech PrivateLimited and other associates, with whom the petitioner haddeclared certain transactions while submitting its return earlierwhich was made basis for assessment. However, subsequent tothat assessment order passed in the case of the petitioner on15.07.2021, search and survey operation was carried out on M/s.APCO Infratech Private Limited. The petitioner was afforded anopportunity of hearing and it submitted a detailed reply. Thecompetent authority examined the reply of the petitioner andpassed a detailed order under Section 148A(d) of the Act. It wasfollowed by notice under Section 148 of the Act. 7.As is revealed from the order dated 30.03.2021 passedunder Section 148A(d) of the Act, when search and survey actionunder Section 132 and 133 of the Act was conducted on M/s.APCO Infrstech Private Limited and other associates on15.09.2021 by the jurisdictional DDIT (Investigation), during postsearch analysis of the statement of evidence gathered during thesearch,issueofcirculartransactionsonwhichescapement/concealmentofincomeorineligibledeductions/expenses claimed were notified for the assessmentyear 2018-2019. The order further shows that from the perusal ofthe GST returns that M/s. APCO Infratech Private Limited hasentered into circular transactions with the petitioner M/s. ChetakEnterprises Limited in financial year 2017-2018 wherein bogusbills have been raised by M/s. APCO Intratech Private Limited onthe petitioner M/s. Chetak Enterprises Limited and vice versa inorder to artificially inflate turn over without executing any work.The competent authority further noticed that the petitioner M/s.Chetak Enterprise Limited had raised invoice of Rs.72 crores onM/s. APCO Infratech Private Limited on 31.03.2018, which in turnhad raised invoice of almost identical amount i.e. Rs.75 crores on31.03.2018. The giving of sub-contract to each other at the fagend of the year and that too, for almost same amount gave rise tosuspicion that no actual work was actually being done andfictitious circular transactions may have been executed for thepurpose of raising turn over limit and garnering better creditrating. 8.The order further reveals that the petitioner’s office wascovered under Section 133A of the Act and statement of one of its Director was recorded. He was asked for the assessment year2017-2018 of M/s. APCO Infratech Private Limited in the books ofthe petitioner whereby M/s. APCO Infratech Private Limited isdebited to the tune of Rs.79.20 crores and a sum of Rs.82.50crores is credited. Though, stand of there being a sub-contractwas raised, no documentary evidence in support of claim ofexecuting works in compliance to execute the sub-contracts couldbe produced despite an opportunity was granted. 8.The order further reveals that the petitioner’s office wascovered under Section 133A of the Act and statement of one of its Director was recorded. He was asked for the assessment year2017-2018 of M/s. APCO Infratech Private Limited in the books ofthe petitioner whereby M/s. APCO Infratech Private Limited isdebited to the tune of Rs.79.20 crores and a sum of Rs.82.50crores is credited. Though, stand of there being a sub-contractwas raised, no documentary evidence in support of claim ofexecuting works in compliance to execute the sub-contracts couldbe produced despite an opportunity was granted. 9.In the aforesaid background, the authority recorded that asthe petitioner-assessee has not produced any satisfactorydocumentary evidence in support of executing the sub-contractsmade between the petitioner M/s. Chetak Enterprises Limited andM/s. APCO Infratech Private Limited, the assessee having alsofailed to produce bills and vouchers with regard to transactionswith M/s. APCO Infotech Private Limited, a case of reopening ofassessment is made out. We, thus, find that the materialinformation collected by the respondent was made a basis toarrive at the reason to believe that the petitioner is engaged inraising fake invoices in executing circular transactions with M/s.APCO Infratech Private Limited. On such detailed considerationthat income chargeable to tax to the tune of Rs.75 crores hasescaped assessment for the assessment year 2018-2019, withinthe meaning of Section 147 of the Act, the authority consideredthe present case to be a fit case for issuance of notice underSection 148 of the Act for the assessment year 2018-2019. 10.Reliance has been placed by learned counsel for thepetitioner on the judgment of this Court in the case of MicroMarbles Private Limited vs. Office of the Income Tax Officer Ward-1 [D.B. Civil Writ Petition No.13719/2021, dated04.01.2023]. On facts, that was a case where it was found thatmaterial referred to in the “reasons to believe” was not supplied tothe petitioner, the entire proceedings for reopening of theassessment were found to be vitiated. However, in the presentcase, the petitioner was given due opportunity of hearing bygiving notice under Section 148A(b) of the Act, to which he gave adetailed reply and thereafter detailed order under Section 148A(d)has been passed. 11.The Supreme Court in the case of 'Raymond Woollen MillsLimited vs. Income Tax Officer, Centre XI, Range Bombayand others'(Civil Appeals No.1972 of 1992 with No.1973 of1992. dated 17.12.1997), held that - “3. In this case, we do not have to give a final decisionas to whether there is suppression of material facts bythe assessee or not. We have only to see whether therewas prima facie some material on the basis of whichthe Department could reopen the case. The sufficiencyor correctness of the material is not a thing to beconsidered at this stage. We are of the view that thecourt cannot strike down the reopening of the case inthe facts of this case. It will be open to the assessee toprove that the assumption of facts made in the noticewas erroneous. The assessee may also prove that nonew facts came to the knowledge of the Income-taxOfficer after completion of the assessment proceeding.We are not expressing any opinion on the merits of thecase. The questions of fact and law are left open to beinvestigated and decided by the assessing authority.The appellant will be entitled to take all the pointsbefore the assessing authority.” 12.In'Rasulji Buxji Kathawala vs. Income TaxCommissioner, Delhi and another' (Civil Writ No.44 of 1955,dated 2.4.1956) while dealing with the similar situation underthe 1922 Act, Division Bench of this Court held that- 12.In'Rasulji Buxji Kathawala vs. Income TaxCommissioner, Delhi and another' (Civil Writ No.44 of 1955,dated 2.4.1956) while dealing with the similar situation underthe 1922 Act, Division Bench of this 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 stage whenother remedies which arc not necessarily onerous arestill open to the applicant under the Act. We,therefore, refuse to intervene at this stage in thiscase, and leave it to the applicant to pursue hisremedies under the Income-tax Act so far as thequestion of his charge-ability to income-tax under theAct, or other matters are concerned.” 13.While dealing with the similar situation under the old Act i.e. Indian Income Tax Act, 1922, Division Bench of the Punjab andHaryana High Court in 'Lachhman Das 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 show thatthe legislature has entrusted the determination offacts and of law to the Income-tax Officers. Aparticular machinery has been set up under the Act“by the use of which alone” total assessable incomefor the purposes of the Income-tax is to beascertained and jurisdiction to question theassessment otherwise than by the use of thismachinery is incompatible with the scheme of theAct. The challenge of the action of the Income-TaxOfficer by a writ prohibition or mandamus is,therefore, not available to the assessee.” 14.The Division Bench of the Punjab and Haryana High Court in the case of 'Sumit Passi vs. Assistant Commissioner of Income-Tax', (2016) 386 ITR, held that- “29…. The reasons assigned by the Assessing Officerto tentatively believe that taxable income has escapedassessment cannot be brushed aside at the thresholdwithout a fact finding procedure, more so when thepetitioners are not remediless and have got equallyefficacious recourses under the Act. 30.A somewhat similar dictum is discernible fromCIT v. Chhabil Dass Agarwal [2014] 1 SCC 603 as itholds that the Act provides complete machinery for the assessment/reassessment of tax, imposition ofpenalty and for obtaining relief in respect of anyimproper orders passed by the Revenue Authorities,and the assessee could not be permitted to abandonthat machinery and to invoke the jurisdiction of theHigh Court under Article 226 of the Constitution whenhe had adequate remedy open to him by an appeal tothe Commissioner of Income-tax (Appeals).31.Having held so, it is not expedient for this Courtto express its opinion on the rival submissions as itmay unwittingly cause prejudice to either party.Suffice it to say that no case to quash the notice(s)issued under section 148 read with Section 147 of theAct or the order(s) rejecting the objections, is madeout at this premature stage.” 15.The Delhi High Court in W.P.(C) 5787/2022 titled as Gulmuhar Silk Pvt. Ltd. vs. Income Tax Officer Ward 10(3) Delhi, while considering the same question held that: 15.The Delhi High Court in W.P.(C) 5787/2022 titled as Gulmuhar Silk Pvt. Ltd. vs. Income Tax Officer Ward 10(3) Delhi, while considering the same question held that: “6.Though it is the petitioner's case that theimpugned order is erroneous on facts, yet this Courtis of the opinion that the petitioner would have ampleopportunity during the course of proceedings beforedifferent statutory forums to show that the finding offact arrived at was erroneous. Moreover, at thisstage, no assessment order has been passed and ithas only been observed that it is a fit case forissuance of notice under Section 148 of the Act. Infact, the Supreme Court in Commissioner of IncomeTax and Ors. Vs. Chhabil Das Agarwal, (2014) 1 SCC603 has held that as the Income Tax Act, 1961provides complete machinery for assessment/reassessment of tax, assessee is not permitted toabandon that machinery and invoke jurisdiction ofHigh Court under Article 226.” 16.Recently, a Division Bench of this Court in the case of Laxmi Meena vs. Union of India & Ors. [D.B. Civil Writ PetitionNo.447/2023, decided on 15.02.2023] held that in the matterof challenge to order passed under Section 148A of the Actfollowed by issuing notice under Section 148 of the Act, thepetitioner had not alleged any procedural impropriety, irregularity or violation of statutory provisions in the matter of initiation ofproceedings or passing of any order under Section 148A(d) of theAct. The Division Bench relied upon the order passed by the HighCourt of Punjab 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 by thestatutory authority, the writ Court should notinterfere at such a pre-mature stage. Moreover it isnot a case where from bare reading of notice it canbe axiomatically held that the authority has clutchedupon the jurisdiction not vested in it. The correctnessof order under Section 148A(d) is being challenged onthe factual premise contending that jurisdictionthough vested has been wrongly exercised. By now itis well settled that 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 the case ofAnshul Jain (supra), was dismissed by Hon’ble Supreme Court videorder dated 02.09.2022 which reads as under:- “1.What is challenged before the High Court was there-opening notice under Section 148A(d) of theIncome Tax Act, 1961. The notices have been issued,after considering the objections raised by thepetitioner. If the petitioner has any grievance onmerits thereafter, the same has to be agitated beforethe Assessing Officer in the re-assessmentproceedings.2.Under the circumstances, the High Court hasrightly dismissed the writ petition.3.No interference of this Court is called for.4.The present Special Leave Petition standsdismissed. 5.Pending applications stand disposed of.” 18.The Division Bench taking into consideration the settled legalposition, dismissed the petition giving liberty to the writ petitionerto avail the remedy in the proceedings subsequent to notice underSection 148 of the Act. 19.In view of the above considerations, no case is made out forinterference at this stage. The writ petition is, therefore,dismissed, however, reserving liberty to the petitioner to raise allthe objections at the subsequent stages after issuance of noticeunder Section 148 of the Act and re-assessment proceedings. (KULDEEP MATHUR),J (MANINDRA MOHAN SHRIVASTAVA),ACJ 1-MohitTak/-