North End Foods Marketingprivate Limited v. Deputy Commissioner Ofincome Tax Circle 16(1) Delhi

$~29 IN THE HIGH COURT OF DELHI AT NEW DELHI +W.P.(C) 13779/2022 and CM APPL. 42107/2022 (for stay) NORTH END FOODS MARKETINGPRIVATE LIMITED ..... PetitionerThrough :Mr.RohitTiwariandMr.AkashShukla, Advocates. versus DEPUTY COMMISSIONER OFINCOME TAX CIRCLE 16(1) DELHI..... RespondentThrough :Mr.AbhishekMaratha,SeniorStanding Counsel for Revenue. Date of Decision: 23[rd]September, 2022 % CORAM:HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMEET PRITAM SINGH ARORA, J (Oral): 1.The present writ petition has been filed challenging the order dated26[th]July, 2022, passed under Section 148A(d) of the Income Tax Act, 1961(‘the Act’) and the notice dated 26[th]July, 2022, issued under Section 148 ofthe Act, for the Assessment Year (‘AY’) 2013-14. 2.In the Show Cause Notice (‘SCN’) dated 20[th]May, 2022, issuedunder Section 148A(b) of the Act, the Petitioner/assessee was to show causewithrespecttoinformationreceivedbytheIncomeTaxDepartment(‘Department’) that the assessee is involved in High ValueTransactions with Mr. Naveen Sharma [Proprietor of M/s Mahamaya Trading Company and M/s Surya Trading Company (‘entities’)] and as perthe information received, the said entities were engaged in providingaccommodation entries and the assessee, was also a beneficiary as it hadaHigh Value Transaction amounting to Rs.1,50,00,000/- during the FinancialYear (‘FY’) 2012-13. The SCN furtherrecords that upon receipt of the aforesaidinformation, a notice dated 13[th]April, 2021, was issued to the assessee underSection 133(6) of the Act, calling for the information regarding itstransaction with M/s Mahamaya Trading Company and M/s Surya TradingCompany, however, no reply was received from the assessee. The assesseewas thus, called upon to furnish its reply to the said information in the SCNdated 20[th]May, 2022, issued under Section 148A(b) of the Act, on orbefore3[rd]June, 2022. 3.The assessee in compliance to the said SCN, filed its reply dated3[rd]June, 2022, raising legal objections to the initiation of the reassessmentproceedings, which were restricted to the issue of limitation. The objectionsraised by the assessee in its reply can be summarized as follows: (a)The procedure envisaged under Section 148A of the Act is required tobe complied with before issuing a notice under Section 148 of the Act;be complied with before issuing a notice under Section 148 of the Act; (b)Section 149 of the Act shall be applicable and rights and defensesavailable to the assessee under the said provision shall be available toit;available to the assessee under the said provision shall be available toit; (c)Central Board of Direct Taxes (‘CBDT’) Instructions dated 11[th]May,2022, are erroneous and contrary to the decisions of the SupremeCourt in the case of Union of India vs. Ashish Agarwal, 2022 SCCOnline SC 543; and2022, are erroneous and contrary to the decisions of the SupremeCourt in the case of Union of India vs. Ashish Agarwal, 2022 SCCOnline SC 543; and (d)The present proceedings which pertain to AY 2013-14 cannot bereopened due to the proviso to Section 149(1) of the Act (as amendedby the Finance Act, 2021).reopened due to the proviso to Section 149(1) of the Act (as amendedby the Finance Act, 2021). 4.Pertinently, in this reply to the SCN, the assessee did not refer to oroffer any explanation qua the transactions undertaken by the assessee withM/s Mahamaya Trading Company and M/s Surya Trading Company. Thereply was completely silent on the transaction. (d)The present proceedings which pertain to AY 2013-14 cannot bereopened due to the proviso to Section 149(1) of the Act (as amendedby the Finance Act, 2021).reopened due to the proviso to Section 149(1) of the Act (as amendedby the Finance Act, 2021). 4.Pertinently, in this reply to the SCN, the assessee did not refer to oroffer any explanation qua the transactions undertaken by the assessee withM/s Mahamaya Trading Company and M/s Surya Trading Company. Thereply was completely silent on the transaction. 5.The Assessing Officer (‘AO’)after considering reply of the assesseedated 3[rd]June, 2022, observed that no response has been furnished on themerits of the information put to the assessee in the SCN dated 20[th]May,2022. With respect to the issue of limitation, the AO held that the notice hasbeen issued within limitation, as in this case initial notice was issued on 22[nd]April, 2021, under the unamended Section 148 of the Act and the presentproceedings are in pursuance to the judgment of the Supreme Court inAshish Aggarwal (supra). Consequently, the AO concluded that the assesseehasnotdenied the transaction and the income amounting to Rs.1,50,00,000/-hasescaped assessmentand he initiatedreassessmentproceedings vide impugned notice dated 26[th]July, 2022. 6.Learned counsel for petitioner has contended that the findings of theAO in its SCN dated 20[th]May, 2022, and in the impugned order dated 26[th]July, 2022, that the assessee had failed to respond on the merits of theallegations is incorrect and contrary to the record of the AO. He submits thatthe assessee had, filed a reply on 16[th]April, 2021, to the AO in response tothe notice dated 13[th]April, 2021, issued under Section 133(6) of the Act. Hestates that with the said reply, the assessee had filed all the relevantdocuments evidencing its transactions with M/s Surya Trading Company for a sum of Rs. 1,50,00,000. He states that the assessee had clarified thereinthat it had no transactions with M/s Mahamaya Trading Company. He statesthat the assessee filed a further reply on 24[th]July, 2021, disputing theinitiation of the reassessment proceedings in pursuance to the Section 148Notice dated 22[nd]April, 2021. He states that the said replies, though onrecord, have not been considered by the AO while passing the impugnedorder dated 26[th]July, 2022 and he therefore, seeks setting aside of theimpugned order and the notice, both dated 26[th]July, 2022. 7.Issue notice. Mr. Abhishek Maratha, learned Senior Standing Counselfor Revenue appears on advance notice and states that the assessee is abeneficiary of an accommodation entry and the transaction between theassessee and M/s Surya Trading Company is not genuine. The adjudicationof the petition involves disputed questions of facts and same cannot bedetermined in the present proceedings. 8.We have heard learned counsel for the parties. We have perused replydated 3[rd]June, 2022, filed by the petitioner in response to the SCN dated20[th]May, 2022. In the said reply, the assessee had not adverted to its repliesdated 16[th]April, 2021and 24[th]July, 2021.The reason for not adverting to itsearlier replies is curious, considering this allegation was specificallyrecorded by AO in the SCN. The said reply dated 3[rd]June, 2022,also doesnot deal with the merits of the allegations contained in the statutory SCN asregards the nature of transactions between assessee and the third party. 9.In its reply dated 16[th]April, 2021, the assessee admitted that it hadcarried out a single transaction of Rs.1,50,00,000/- with M/s Surya TradingCompany in the relevant year and clarified that it had no transaction with theentity M/s Mahamaya Trading Company. In the reply furnished on 16[th] 9.In its reply dated 16[th]April, 2021, the assessee admitted that it hadcarried out a single transaction of Rs.1,50,00,000/- with M/s Surya TradingCompany in the relevant year and clarified that it had no transaction with theentity M/s Mahamaya Trading Company. In the reply furnished on 16[th] April, 2021, the assessee annexed its ledger and bank statement whichreflectsa single transaction with M/s Surya Trading Company during the FY2012-13. The assessee has not furnished any explanation in the said replywith respect to the purpose of the transaction with the said entity, though,the Department, in its notice dated 13[th]April, 2021, issued under Section133(6) of the Act had specifically called upon the assessee to furnish thepurpose of the transaction. No documents were filed with the said reply toevidence that the said transaction was carried out in ordinary course ofbusiness. 10.It is the case of the Revenue that the entity M/s Surya TradingCompany is a shell entity which is engaged in the business of providingaccommodation entries and the assessee is a beneficiary. The assessee hasnot placed on record any documents explaining and substantiating the natureof its transaction with M/s Surya Trading Company. 11.The Revenue’s contention that assessee is a beneficiary of anaccommodation entry from M/s Surya Trading Company and the assessee’scontention that it was done in course of business are rival pleas and itsdetermination is a pure question of fact, which will have to be determined bythe statutory authorities after appreciation of evidence. A writ petitioncannot be maintained to determine the disputed facts and therefore thispetitionisnotmaintainableatthisinterimstageofreassessmentproceedings. 12.The Supreme Court in Commissioner of Income Tax and Ors. v.Chhabil Das Agarwal, (2014) 1 SCC 603 has held that as the Act of 1961provides a complete machinery for assessment/reassessment of tax, theassessee is not permitted to abandon that machinery and invoke writ jurisdiction of High Court under Article 226. The present case does not fallunder the exceptional grounds on which a writ jurisdiction of the Court canbe invoked. 13.Accordingly, the present writ petition and pending applications aredismissed. However, this Court clarifies that the AO shall decide the matteron its own merits without being influenced by any observations made in thepresent order. MANMEET PRITAM SINGH ARORA, J MANMOHAN, J SEPTEMBER 23, 2022j