Nagalinga Nadar. M.m.rep. By Its v. The Additional/Joint/Deputy/Assistant Commissioner Of Income Tax/Income Tax Officer, Income Tax Department, National Faceless Assessment Centre, Delhi

BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT DATED: 16.09.2021 CORAM THE HON'BLE MR.JUSTICE R.SURESH KUMAR W.P.(MD)No.16695 of 2021and W.M.P.(MD)No.13593 & 13594 of 2021 Nagalinga Nadar. M.M.Rep. by its partner M.Jikki ...Petitioner -Vs- 1. The Additional/Joint/Deputy/Assistant Commissioner of Income Tax/Income Tax Officer, Income Tax Department, National Faceless Assessment Centre, Delhi 2. The Income Tax Officer, Ward – 3, Income Tax Department, Madura Coats Compound, Railway Feeder Road, Virudhunagar, Tamil Nadu – 626 001. ... Respondents Prayer:Writ Petition filed under Article 226 of Constitution ofIndia, to issue a Writ of Certiorari, calling for the records of theRespondent No.1 contained in its assessment order bearing DIN:ITBA/AST/S/143(3)/2021-22/1035116185(1) passed under Section 143(3)read with Section 144B of the Income Tax Act, 1961 dated 26.08.2021,for PAN: , assessment year (AY) 2018-19, and allproceedings in furtherance to the said order thereof, and to quashthe same as arbitrary, unjust and illegal. For Petitioner : Mr.R.V.Easwar Senior Counsel For M/s.K.GovindarajanFor Respondents: Mrs.S.Srimathy Senior Standing Counsel O R D E R Prayer sought for herein is for a Writ of Certiorari, callingfor the records of the Respondent No.1 contained in its assessmenthttps://hcservices.ecourts.gov.in/hcservices/order bearing DIN:ITBA/AST/S/143(3)/2021-22/1035116185(1) passed under Section 143(3) read with Section 144B of the Income Tax Act,1961 dated 26.08.2021, for PAN: , assessment year (AY)2018-19, and all proceedings in furtherance thereof, and to quashthe same. 2.That the petitioner is a Firm and engaged in business ofpurchase and sale of edible oil as a trader. It had filed return ofincome on 20.09.2018 for the Assessment Year 2018-19, declaring thetotal income of Rs.16,400/-. Therefore, the revenue, thought ofselecting the case for scrutiny under CASS (Computer Aided ScrutinySelection)for the verification of transactions. Accordingly,notice under Section 143(2) of the Income Tax Act, [in short 'theAct']dated 22.09.2019 was issued. Notice under Section 142(1) ofthe Act also along with the questionnaire, was issued on 28.12.2020,and the response was directed to be made on or before 06.01.2021. 3.In response to the same, the Assessee submitted documents aswell as information, vide their submission, dated 12.01.2021.Thereafter, notice under Section 142(1) was issued dated 03.02.2021and 04.02.2021 to the Assessee, fixing the date of compliance on08.02.2021. 4.Since the Assessee seems to have given certain sources forunsecured credit, notice were given under Section 133(6), to theassessee and to the lenders, who claimed to have given unsecuredloan or credit to the Assessee. The Assessee filed furthersubmissions on 07.02.2021 and 08.02.2021, which were considered bythe revenue. 5.After considering the reply or submissions made by theAssessee, the revenue has come to the conclusion that, insofar asthe unsecured credit claimed by the Assessee is concerned, whichwere made by three persons or entities and from each of such personsor entities, heavy amount was transacted to the Assessee's accountas unsecured credit. Also the Assessee was asked by notice, dated28.12.2021 as to the details of unsecured loan, copy of ITRs and acopy of bank accounts of the persons, from whom these unsecuredloans have been accepted to substantiate the identity, credit-worthiness and genuineness of the lenders. In response to the samealso, the Assessee had given details on 12.01.2021, which were alsoconsidered by the revenue. 5.After considering the reply or submissions made by theAssessee, the revenue has come to the conclusion that, insofar asthe unsecured credit claimed by the Assessee is concerned, whichwere made by three persons or entities and from each of such personsor entities, heavy amount was transacted to the Assessee's accountas unsecured credit. Also the Assessee was asked by notice, dated28.12.2021 as to the details of unsecured loan, copy of ITRs and acopy of bank accounts of the persons, from whom these unsecuredloans have been accepted to substantiate the identity, credit-worthiness and genuineness of the lenders. In response to the samealso, the Assessee had given details on 12.01.2021, which were alsoconsidered by the revenue. 6.From those details furnished by the Assessee, with regard tothe identity, credit-worthiness of the lenders, the revenue was ableto find out that, one of the creditors, Manickavel Edible OilPrivate Limited had filed ITR for the Assessment Year 2018-19. for atotal income of Rs.2,26,40,520/-, however, another lender, namely,Sri Nagalainga Vilas Oil Mills is concerned, it has filed ITR forthe Assessment Year 2018-19 only for a total income ofRs.1,35,580/-.https://hcservices.ecourts.gov.in/hcservices/ 7.Therefore, revenue, thought of issuing notice under Section133(6) of the Act, dated 04.02.2021 to the lenders asked them toprovide the copy of Audit report, profit and loss accounts, balancesheet, etc. 8.In response to the notice, both the lenders have providedsimilar reply and stated that, it has advanced money to varioussister concerns and has also received funds from them. Those detailsalso were subsequently examined by the revenue. According to therevenue, on the examination of those details submitted both by theAssessee as well as the lenders, a position has emerged under which,the revenue has found that the Assessee has been following NILincome ITR since many years, and it filed return of income declaringa sum of Rs.16,400/- in the year under consideration. Thecomparative table of turnover, purchase, expenses, profit, etc., forAssessment Year 2017-18 and 2018-19 also have been unearthed andstated by the revenue. Therefore, the revenue had come to aconclusion that, the perusal of the said comparative table has madeit clear that, it has a typical balance sheet nature with highvalues of unsecured loans, creditors on liability side and debtorsor loans and advances on asset side, therefore, it did not have anysignificant fixed asset or any capital, and similar trendcan benoticed for the prior year also. The revenue also seems to havefound that the said lender , namely, Sri Nagalainga Vilas Oil Millalso filed ITR on the total income of only Rs.1,34,580/-, however,it claimed to have given unsecured loan to the Assessee amounting toRs.41,34,69,610/-. 9.In view of these revelations, the revenue thought of invokingSection 68 of the Act, and accordingly, the revenue issued a showcause notice on 31.05.2021, proposing an addition of the saidRs.41,34,69,610/-under Section 68 of the Act, on account of theunsecured loan taken from Sri Nagalainga Vilas Oil Mills, that is,one of the lenders and asked the show cause. In response to thesame, Assessee filed submissions dated 02.07.2021, 14.07.2021 and07.08.2021 and it has also raised objections on the proposedaddition. 9.In view of these revelations, the revenue thought of invokingSection 68 of the Act, and accordingly, the revenue issued a showcause notice on 31.05.2021, proposing an addition of the saidRs.41,34,69,610/-under Section 68 of the Act, on account of theunsecured loan taken from Sri Nagalainga Vilas Oil Mills, that is,one of the lenders and asked the show cause. In response to thesame, Assessee filed submissions dated 02.07.2021, 14.07.2021 and07.08.2021 and it has also raised objections on the proposedaddition. 10.These objections and the reply given by the Assessee inresponse to the notice proposing to make such addition, wereconsidered by the revenue, and ultimately, the revenue has come tothe conclusion that the said sum of Rs.41,34,69,610/- taken duringthe year as unsecured loan from Sri Nagalinga Vilas Oil Mill, is tobe added to the total income of the Assessee under Section 68 of theAct, and accordingly, the assessment orders were issued, ofcourse,along with the interest and penalty, etc. Challenging the saidassessment order, dated 26.08.2021, the petitioner has moved thepresent writ petition with the aforesaid prayer. https://hcservices.ecourts.gov.in/hcservices/ 11.Mr.R.V.Easwar, learned Senior Counsel appearing for thepetitioner/Assessee, has made a submission only on one aspect. Hestates that, normally as against the impugned assessment order, theAssessee has to be relegated to file an appeal under the Statute,however, in the present case, since the assessment has been madeunder the new scheme called “Faceless Assessment Scheme”, though thesame has been introduced from the year 2019, very recently, it hasgiven a statutory backing by insertion of Section 144(B) in the ITAct and, under the said scheme, throughout the country, the FacelessAssessment Scheme Authority can take any return, any case forscrutiny and reassessment could be made, where, during the process,absolutely, there could be no chance of meeting point between theofficials concerned of the IT Department and the Assessee or theirrepresentatives. 12.In view of the new scheme, which has been recentlyintroduced, and under the said scheme only the present assessmenthas been made and completed, and most of the time, when theseassessment was taken place, the country was running with COVID-19,therefore, for all these reasons, eventhough, there has been achance for the Assessee to ask for a personal hearing, the Assessee,has missed the chance, by admittedly, has not asked for suchpersonal hearing. 13.Therefore, the learned Senior Counsel would contend that,insofar as the proposed addition is concerned, to the extent of morethan 40 crores, since it is a huge sum, the petitioner/Assesseedefinitely would be able to satisfy the authorities of the revenueby showing the books of accounts as well as the bank transactionsthat those credit, though unsecured, accepted from the lender, wasthe genuine transaction, and in this regard, mere filing ofdocuments for the scrutiny or examination of the revenue may not besufficient to satisfactorily convince the revenue officials, andtherefore, in that regard, it become incumbent on the part of theAssessee to seek for a personal hearing, though he missed thatopportunity at the first instance. 14.Hence, the learned Senior Counsel makes an appeal beforethis Court, and only for this very limited prayer, thepetitioner/Assessee has approached this Court, knowing well that ithas got an appeal remedy. 14.Hence, the learned Senior Counsel makes an appeal beforethis Court, and only for this very limited prayer, thepetitioner/Assessee has approached this Court, knowing well that ithas got an appeal remedy. 15.I have also heard Mrs.S.Srimathy, learned Standing Counselappearing for the respondent Income Tax Department, who would submitthat, though a huge amount to the extent of more than 40 crores wasclaimed to have been accepted by way of unsecured credit or loanfrom a third party, which claimed to be a sister concern, however,the lender has shown the total income of the relevant year only tothe extent of 1,35,580/- rupees, therefore, these transaction canvery well be brought under Section 68 of the Act, and in thishttps://hcservices.ecourts.gov.in/hcservices/ context, the genuineness and credit worthiness of the lender has tobe examined. 16.Therefore, after invoking the power under Section 68, thegenuineness and credit-worthiness of the lender was assessed andexamined by scrutinizing the documents submitted both by theAssessee as well as the lender , and thereafter only, after thoroughscrutiny, the revenue has come to the conclusion that, the saidamount of more than 40 Crores rupees, has to be added in the accountof the petitioner/Assessee as an additional income. 17.In this context, learned Standing Counsel for the Income TaxDepartment would further submit that, before passing the impugnedassessment order, enough opportunities were given, atleast four timenotices had been given and in each of the time, the Assessee haspromptly responded and produced the documents, so, what are all thedocuments available with the petitioner/Assessee had been procuredfrom the Assessee, and those documents having been scrutinized, therevenue has come to such a conclusion. 18.The learned Standing Counsel would further add that, apartfrom the notice given and the documents were procured from theAssessee, further notice had been given to the lenders also and inresponse to the same, the lenders also had given their own documentsto establish the said transactions, especially, the transaction ofthe lenders, who claimed to have credited by way of a loan to theAssessee to the extent of more than 40 crores, therefore, aftergiving all such opportunities to the petitioner/Assessee, therevenue since has come to the conclusion and the assessment has beenmade by adding the said amount, which is a huge amount, for which,absolutely, there is no scope for any escape, the learned StandingCounsel would submit that the impugned assessment order cannot beassailed on the ground of violation of principles of natural justiceand therefore, if at all, the petitioner/Assessee has got anygrievance over the assessment order, which is impugned herein, hecan very well be relegated to the AppellateAuthority to prefer aregular appeal. 19.I have considered the said rival submissions made by thelearned counsel appearing for the parties and have perused thematerials placed before this Court. 20.It is a settled proposition that, insofar as the order inoriginal that is the order of assessment passed by the assessingauthority is concerned, the appeal would lie before the appellateauthority, as against which, further appeal also would be therebeforethe ITAT. In such cases, if an Assessee wants to assail theorder of assessment passed by the assessing authority/originalauthority, directly by making the writ petition before this Courtinvoking the extra-ordinary jurisdiction under Article 226 of thehttps://hcservices.ecourts.gov.in/hcservices/ 19.I have considered the said rival submissions made by thelearned counsel appearing for the parties and have perused thematerials placed before this Court. 20.It is a settled proposition that, insofar as the order inoriginal that is the order of assessment passed by the assessingauthority is concerned, the appeal would lie before the appellateauthority, as against which, further appeal also would be therebeforethe ITAT. In such cases, if an Assessee wants to assail theorder of assessment passed by the assessing authority/originalauthority, directly by making the writ petition before this Courtinvoking the extra-ordinary jurisdiction under Article 226 of thehttps://hcservices.ecourts.gov.in/hcservices/ Constitution of India, there are three exceptional circumstances,one such circumstance is violation of principles of natural justice.21.This is the only principle, now, is projected byMr.R.V.Easwar, learned Senior counsel appearing for thepetitioner/Assessee, by stating the reason that, though notices havebeen given, response have been received from the Assessee, in orderto explain through the documents produced to establish that thetransactions in question was genuine transaction, there must be apersonal hearing, which could have been asked by the Assessee, but,due to the change of procedure under Faceless Assessment Scheme,under which the present assessment has been made, thepetitioner/Assessee, inadvertently, has missed it. 22.Apart from this reason, no other ground has been urged, noother reason has been stated and no other plea has been made by thelearned Senior counsel appearing for the petitioner/Assesseewarranting interference of this Court. 23.Therefore, insofar as the merits of the case is concerned,this Court need not traverse and those issues can once again be goneinto by the assessing authority, if the matter is remitted back tothem, on the sole ground of alleged violation of principles ofnatural justice. 24.Here in the case in hand, as pointed out by the learnedSenior counsel, a huge sum has been added in the income of theAssessee for the concerned assessment year. Whether such a huge sumis a taxable income or not, is a major question to be decided in theissue, however, before going into the merits of that issue, whethercomplete opportunity had been given to the petitioner/Assessee,which includes the personal hearing. In this regard, very fairly,the learned Senior counsel has submitted that, specifically thatchance of personal hearing, though was not asked by thepetitioner/Assessee, that become incumbent on the part of thepetitioner/Assessee to seek such a chance of personal hearing, inview of the peculiar facts of the case, where, the petitioner hasbeen placed to explain with the documents already submitted to therevenue people to establish that the transactions under which, thepetitioner/Assessee accepted that sum from a lender was a genuinetransaction taken through the bank. 25.When this aspect has been projected, this Court feel that,such a chance can be given to the petitioner/Assessee, otherwiseeven if appeal is field against the assessment order, if this pointis once again raised before the appellate authority, the appellateauthority also has to necessarily consider the same and in thatcase, the entire assessment process, which culminated in theimpugned order, would get further delayed. Therefore, instead ofrelegating the Assessee to approach the appellate authority to raisehttps://hcservices.ecourts.gov.in/hcservices/ 25.When this aspect has been projected, this Court feel that,such a chance can be given to the petitioner/Assessee, otherwiseeven if appeal is field against the assessment order, if this pointis once again raised before the appellate authority, the appellateauthority also has to necessarily consider the same and in thatcase, the entire assessment process, which culminated in theimpugned order, would get further delayed. Therefore, instead ofrelegating the Assessee to approach the appellate authority to raisehttps://hcservices.ecourts.gov.in/hcservices/ the same point of getting a personal hearing from the revenue, thisCourt feel that, since the chance of getting a personal hearing ispart and parcel of the principles of natural justice, therefore, itcomes within the domain of the writ jurisdiction, and on thatground, this Court feel that this writ petition can be entertained,and accordingly, it is disposed of with the following orders:“that the impugned order for the aforesaidreasons and discussions hereinabove made, is herebyset aside, and the matter is remitted back to therespondent Assessing Authority for reconsideration.While, reconsidering the same, the respondentrevenue shall give one day personal hearing to thepetitioner/Assessee, which shall be between 1[st] ofOctober and 8[th] of October. Within these days, inany working day, such a personal hearing for oneday can be given to the petitioner, for whichadvance notice shall be given by the respondent tothe petitioner/Assessee, and on receipt of thesame, the petitioner/Assessee, without fail, shallappear on the date so fixed for personal hearingand produce all documents, if not anything alreadyproduced and try to explain, to the satisfaction ofthe revenue, the case of the Assessee.” 26.It is made clear that except the one day personal hearing,no further personal hearing shall be sought for by thepetitioner/Assessee and, if any such request is made, the same neednot be considered by the revenue. 27.After giving such an opportunity of personal hearing asindicated above for one day, it is open to the revenue to proceed topass a fresh order of assessment, in accordance with law and onmerits. 28.With these directions, this writ petition is disposed of.However, there shall be no order as to costs. Consequently,connected miscellaneous petitions are closed. // True Copy // Assistant Registrar(P & A) Sub Assistant Registrar(CS) PJL https://hcservices.ecourts.gov.in/hcservices/ Note: In view of the present lock down owing to COVID-19pandemic, a web copy of the order may be utilized forofficial purposes, but, ensuring that the copy of the orderthat is presented is the correct copy, shall be theresponsibility of the Advocate/litigant concerned. To1. The Additional/Joint/Deputy/Assistant Commissioner of Income Tax/Income Tax Officer, Income Tax Department, National Faceless Assessment Centre, Delhi 2. The Income Tax Officer, Ward – 3, Income Tax Department, Madura Coats Compound, Railway Feeder Road, Virudhunagar, Tamil Nadu – 626 001. +1 CC to M/s.K.GOVINDARAJAN, Advocate ( SR-29300[F] dated 16/09/2021+1 CC to M/s.S.SRIMATHY, Advocate ( SR-29287[F] dated 16/09/2021 ) TR/SKN(23.09.2021) 8P 5C Order made inW.P.(MD)No.16695 of 2021Dated: 16.09.2021