Neutral Citation No: 2022/Dhc/004238 v. This Is A Digitally Signed Judgement

$~13 *IN THE HIGH COURT OF DELHI AT NEW DELHI+W.P.(C) 13581/2022RATNAGIRI GAS AND POWER PRIVATELIMITED..... PetitionerThrough:Mr. Ved Jain, Mr. Nishchay Kantoor& Ms. Richa Mishra, Advocate.versusASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 19(1)DELHI & ORS...... RespondentsThrough:Mr.RuchirBhatia,Sr.StandingCounselforRevenuewithMs.Mansie Jain, Advocate.Mr. Ranvir Singh, CGSPC for R-4 &5. CORAM: HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA O R D E R%10.10.2022 CM APPL. 41388/2022 Exemption allowed, subject to all just exceptions. Accordingly, this application is disposed of. W.P.(C) 13581/2022 & CM APPL. No. 41387/2022 (for interim relief) 1.The present writ petition has been filed challenging the order dated25[th]July, 2022, passed under Section 148A(d) of the Income Tax Act, 1961,(the ‘Act’) and the notice dated 25[th]July, 2022, issued under Section 148 ofthe Act for the Assessment Year (‘AY’) 2013-14. 2.The learned counsel for the petitioner states that the Assessee filed itsoriginal Income Tax Return for subject AY 2013-14, declaring a loss. Thecase of the Assessee was selected for scrutiny assessment under Section143(2) of the Act and on 21[st]March, 2016, the Assessing Officer (‘AO’) passed an assessment order under Section 143(3) of the Act after makingcertain disallowances. He states that the financial statements of the petitionerwere submitted during the assessment proceedings and Note 21 of the saidfinancial statements specifically dealt with ‘Employee Benefits Expense’and the said note reads as: “Expenditure of Rs. 9.14 crore has been debitedto current year salary and wages which includes Rs. 2.85 crore for currentyear and 6.29 crore for earlier years based on debit note from NTPC”. He states that on 03[rd]February, 2017, notice under Section 154 of theAct read with Section 159 of the Act was issued stating that an amount of Rs6.29 Crores debited in the Profit & Loss Account towards prior period underthe head ‘Wages & Salaries’ is an inadmissible expenditure and is proposedto be disallowed. He states that the Assessee filed its reply to the said noticeand explained that the expenditure has crystallized during the year underconsideration and is thus, an allowable expenditure. He states that the saidreply was taken on record and no adverse order was passed by therespondent. 3.Learned counsel for the petitioner states that the Assessee was servedwith a notice dated 24[th]May, 2021, under Section 148 of the Act followingthe procedure as it existed prior to the commencement of the Finance Act,2021. Pursuant to the directions of the Supreme Court in the case titledUnion of India vs. Ashish Agarwal, 2022 SCC OnLine SC 543, the AOhas issued a notice dated 30[th]May, 2022, to provide the assesee with theinformation which forms the basis of the notice dated 24[th]May, 2021, andreads to the effect-“From the perusal of the records, it has been observedthat the assessee had debited Rs.6,29,00,000/- in the profit and loss accounttowards prior period expenditure under the head “Wages & Salary” which is an inadmissible expenditure. The same should have been disallowed andadded back to the income of the assessee but you have not added back thesame in the computation of Income for AY 2013-14.” 4.The learned counsel for the petitioner lay emphasis on the fact that theissue stated in the notice dated 30[th]May, 2022, is the same issue which wasraised in the rectification proceedings initiated on 03[rd]February, 2017,whereafter considering the reply of the petitioner no adverse order waspassed. It is also contended inter alia that as is evident from the impugnedorder, the only material and documents relied upon by the AO for issuingthe initial notice dated 24[th]May, 2021, are the financial statements of theAssessee. is an inadmissible expenditure. The same should have been disallowed andadded back to the income of the assessee but you have not added back thesame in the computation of Income for AY 2013-14.” 4.The learned counsel for the petitioner lay emphasis on the fact that theissue stated in the notice dated 30[th]May, 2022, is the same issue which wasraised in the rectification proceedings initiated on 03[rd]February, 2017,whereafter considering the reply of the petitioner no adverse order waspassed. It is also contended inter alia that as is evident from the impugnedorder, the only material and documents relied upon by the AO for issuingthe initial notice dated 24[th]May, 2021, are the financial statements of theAssessee. 5.The learned counsel for the petitioner states that the Assessee filed itsreply dated 13[th]June, 2022, before the AO and specifically challenged thatthe proceedings are barred by limitation on account of first proviso toamended Section 149 of the Act as well as first proviso of un-amendedSection 147 of the Act. He states that the Assessee also contended that theincome alleged to have escaped assessment is not represented in the form of‘asset’ and thus, the proceedings are barred by limitation. He states that onmerits, the Assessee filed its reply highlighting that the expenditure underconsideration has crystallized during the year under consideration and thus,is an allowable expenditure. He states that thus, there is no escapement ofincome. 6.He states that the re-opening is sought on the basis of the change ofopinion, which is not permissible. In support of his contention he has reliedupon SMCC Construction India Ltd. vs. Assistant Commissioner ofIncome Tax, [2013] 38 Taxmann.com 146 (Delhi). 7.The learned counsel for the petitioner contends that the AO has noteven considered the aforesaid submissions of the Assessee and has passedthe impugned order without returning any finding on the aforesaidsubmissions. 8.Issue notice. Mr. Ruchir Bhatia, learned Senior Standing Counselaccepts notice on behalf of the respondent-revenue. He states that he hasinstructions that the impugned order and the impugned notice may be setaside and the matter may be remanded to the AO for re-consideration. 9.We have heard the learned counsel for the parties. 10.A perusal of the paper book reveals that the petitioner’s responsesdated 13[th]June, 2022, and 30[th]June, 2022, have not been considered by theAO while passing the impugned order under Section 148A(d) of the Act. 11.Consequently, the impugned order passed under Section 148A(d) ofthe Act as well as the notice issued under Section 148 of the Act, both dated25[th]July, 2022, are set aside and the matter is remanded back to the AO fora fresh decision to be given in accordance with law within eight weeks fromtoday. 12.With the aforesaid directions, the present writ petition along with thepending application stands disposed of. It is clarified that the rights andcontentions of all the parties are left open. MANMOHAN, J OCTOBER 10, 2022/kv/msh MANMEET PRITAM SINGH ARORA, J