Patna High Court Cwjc v. Principalcommissioner Of Income Tax-1, Patna

IN THE HIGH COURT OF JUDICATURE AT PATNACivil Writ Jurisdiction Case No.8526 of 2023 ====================================================== Lakhendra Kumar Raushan @ Lakhendra Kumar Roushan, Son of NageshwarPaswan, Resident of Village-Loma, PS-Jandaha, District-Vaishali. ... ... Petitioner/sVersus 1.The Principal Commissioner of Income Tax-1 Patna, 2[nd] Floor, CentralRevenue Building, Beer Chand Patel Marg, Patna.Revenue Building, Beer Chand Patel Marg, Patna. 2.The Assistant Director of Income Tax, Investigation, Central RevenueBuilding, Veer Chand Patel Marg, Patna.Building, Veer Chand Patel Marg, Patna. 3.The Income Tax Officer, ITO World 1(3), Hajipur Income Tax Office,District-Vaishali.District-Vaishali. ... ... Respondent/s ======================================================Appearance :For the Petitioner/s: Mr.Niraj Kumar, Advocate For the Respondent/s: Mrs. Archana Sinha, Advocate ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE PARTHA SARTHYORAL JUDGMENT(Per: HONOURABLE THE CHIEF JUSTICE) Date : 05-10-2023 The writ petition is filed seeking that the notice issuedunder Section 148A(b) and the order under Section 148A(d) ofthe Income Tax Act, 1961 (“the IT Act” for brevity) be quashed.The petitioner, an assessee under the IT Act had stood for theelections to the Legislative Assembly in pursuance to which hedeclared his movable and immovable assets as well as those inthe name of his spouse and dependents, in accordance with thesaid requirement, along with his nomination papers. It issubmitted that inadvertently there was duplication in so far as repeating his assets in the columns set apart for his spouse anddependents. The Assistant Director of Income Tax,Investigation, Patna, pursuant to orders of the ElectionCommission of India verified the details of the assets andliabilities disclosed by the petitioner and issued a notice dated02.11.2021 under Section 131(1A) of the IT Act seeking furtherdetails about investments in land, building and vehicles both inhis personal name and that of his dependents. The petitionerreplied to the same, producing certain documents which areproduced in the writ petition as Annexures 3 to 6. A furthercommunication was addressed to the petitioner as per Annexure-7 requiring him to submit the modes of investment, thestatement of term loan accounts, account in the SBI and thestatement of all the bank accounts maintained by the petitioner.The petitioner is said to have submitted the same by Annexure-8, undertaking to produce witnesses to substantiate thedocuments produced. By Annexure-9 petitioner was requestedto submit the PAN and address of one other person along withwhom the petitioner had acquired a land, the sale-deed of whichwas earlier produced. 2. The petitioner then was issued with a notice underSection 148A(b). The annexure attached to the notice merely spoke of the description of unexplained investment of purchaseof agriculture land and purchase of vehicle coming to Rs.55,00,000/- (fifty five lacs) and Rs. 33,41,277/- (thirty three lacsforty one thousand two hundred seventy seven). The petitionersubmits that there was no sufficient material regarding theinformation received, but still, he submitted a reply as perAnnexure-12 again furnishing the details earlier supplied andalso the documents to show the manner in which the money wassourced. Without considering the reply of the petitioner,mechanically Annexure-13 was passed, which is an order underSection 149A(d) of the IT Act. Now, Annexure-14 notice hasbeen issued under Section 148 of the IT Act. Annexures 13 and14 are challenged in the writ petition. spoke of the description of unexplained investment of purchaseof agriculture land and purchase of vehicle coming to Rs.55,00,000/- (fifty five lacs) and Rs. 33,41,277/- (thirty three lacsforty one thousand two hundred seventy seven). The petitionersubmits that there was no sufficient material regarding theinformation received, but still, he submitted a reply as perAnnexure-12 again furnishing the details earlier supplied andalso the documents to show the manner in which the money wassourced. Without considering the reply of the petitioner,mechanically Annexure-13 was passed, which is an order underSection 149A(d) of the IT Act. Now, Annexure-14 notice hasbeen issued under Section 148 of the IT Act. Annexures 13 and14 are challenged in the writ petition. 3. Learned counsel for the assessee Shri Niraj Kumarpointed out that there were no details regarding the informationobtained by the Assessing Officer supplied to the petitioner tomake an effective reply. The mere amounts stated, withreference to unspecified lands and vehicles cannot lead to asatisfaction as is required under Section 148A that this is a fitcase for the purpose of proceeding under Section 148. It isargued that there is no valid satisfaction entered into by theIncome Tax Authority and the petitioner cannot be called upon to explain under Section 148 with regard to the alleged escapedincome, especially when the prior satisfaction required toproceed under Section 148 has not been arrived at. The learnedcounsel would rely on Annexure-11 judgment of a DivisionBench of this Court in CWJC No. 8343 of 2022 dated28.03.2023 (Alkem Laboratories Limited v. PrincipalCommissioner of Income Tax-1, Patna). 4. Learned Senior Standing Counsel for the IncomeTax Department Smt. Archana Sinha at the outset points out thatthere is no cause for invocation of the extraordinary remedyunder Article 226 of the Constitution of India, especially whenthe petitioner can show cause to the notice under Section 148.The mere satisfaction that the information is sufficient toproceed is only a prima facie satisfaction entered into, that it is afit case to proceed under Section 148. The petitioner candefinitely place his contentions before the Assessing Officer andthe order under Section 148A(d) cannot regulate theadjudication as to whether there is actually an escaped income,capable of being added on, under Section 148 of the IT Act. Thelearned Senior Standing Counsel would point out that the verysame Division Bench has held otherwise in CWJC No. 14188of 2022 by judgment dated 21.06.2023 in the case of Anju Singh v. The Chief Commissioner of Income Tax (In Situ) Patna. It is also pointed out that the information, as has beenstated by the petitioner himself, was available from thedeclaration made by the petitioner along with his nominationpapers and the details were supplied by the petitioner himselfpursuant to a notice under Section 131(1A). There is no furtherinformation that could be supplied to the petitioner and in thatcircumstance the contention should be negatived. Thedocuments produced by the petitioner himself is relied on tofurther the contention of there being no further information to besupplied to the petitioner. 5. At the outset, we will look at the coordinate Benchdecisions which were placed before us which according to thedepartment are conflicting; which contention according to us isnot correct. Alkem Laboratories Limited (supra) was a case inwhich the notice under Section 148A(b) spoke of anotherIncome Tax Authority having informed that the assessee hadcapital gains of a specified amount during the previous yearwhich was proposed as an escaped assessment within themeaning of Section 147 of the IT Act. The Division Benchfound that the official respondent did not properly disclose theinformation that would be required to be supplied since the 5. At the outset, we will look at the coordinate Benchdecisions which were placed before us which according to thedepartment are conflicting; which contention according to us isnot correct. Alkem Laboratories Limited (supra) was a case inwhich the notice under Section 148A(b) spoke of anotherIncome Tax Authority having informed that the assessee hadcapital gains of a specified amount during the previous yearwhich was proposed as an escaped assessment within themeaning of Section 147 of the IT Act. The Division Benchfound that the official respondent did not properly disclose theinformation that would be required to be supplied since the source of information was said to be merely “other Income TaxAuthority” and but for the amount of capital gains specified asproposed escaped income, there were no details supplied. It wasin the above circumstance that the notice under Section 148A(b), the order under Section 148 A(d) and the resultant noticeunder Section 147 of the IT Act were set aside leaving libertyfor issuance of a fresh notice and directing the Income TaxAuthority to furnish clear information to the assessee asstipulated under Section 148A(b) of the IT Act. 6. Anju Singh (supra) was a case in which one of theallegations was with respect to non supply of the details of theinformation. Therein, the information available was on aninquiry conducted from the details available on the InsightPortal; on analysis of which it was found that the assessee hadreceived dividend from J.M. Equity Hybrid Fund whichspecified amount was proposed to be treated as an escapedincome for grounds stated in the notice. The contention of theassessee was that the report of the Investigation Wing referred tostatements of key persons which were not supplied to theassessee; which made the notice issued and the opportunityafforded, illusory. The Division Bench found favour with thesubmission of the department that the statement of key persons only in so far as it was relevant to the assessee was suppliedsince the disclosure of the complete statement would lead toconfidential contents, not relatable to the assessee beingdisclosed. 7. We do not find any conflict in the two decisions rendered by a co-equal Bench and the divergent result whichensued in the said writ petitions, revolved around the factscoming out in the individual cases; essentially the sufficiency orlack of it of the information supplied to the assessee based onwhich the proceeding under Section 148A was initiated. TheDivision Bench in Anju Singh (supra) noticed the provisionunder Section 148A having been introduced by way of asubsequent amendment and we extract hereunder the succinctinterpretation placed on the provision and the resultantconsequence on the facts of the case as coming forth fromParagraphs 15, 16 and 17 of the judgment:- “15. An assessee does not come inpicture at the first stage stipulated in Clause (a)hereinabove which relates to an enquiry to beconducted if required with respect to aninformation which suggests that the incomechargeable to tax has escaped assessment. Foran enquiry under Clause (a) of Section 148A,the Assessing Officer must have someinformation, for conducting an enquiry.Conducting an enquiry under Clause (a) ofSection 148A is not mandatory and as is clearfrom the language of the provision, which can “15. An assessee does not come inpicture at the first stage stipulated in Clause (a)hereinabove which relates to an enquiry to beconducted if required with respect to aninformation which suggests that the incomechargeable to tax has escaped assessment. Foran enquiry under Clause (a) of Section 148A,the Assessing Officer must have someinformation, for conducting an enquiry.Conducting an enquiry under Clause (a) ofSection 148A is not mandatory and as is clearfrom the language of the provision, which can be done, ‘if required’. The second stagestipulated in Clause (b) of Section 148A requiresservice of notice on the basis of the informationsuggesting that income chargeable to tax hasescaped assessment for a relevant assessmentyear, with the result of the enquiry conducted, ifany, as per Clause (a). By issuance of noticeunder Clause (b), an opportunity of hearing isprovided to the assessee so as to enable theassessee to object to the proposed issuance ofnotice under Section 148 of the Act. Clause (c)mandates consideration of reply of the assesseefurnished in response to the show cause noticeissued under Clause (b) of Section 148A. Anassessing authority is ordained to decide on thebasis of material available on record includingreply of the assessee “whether or not it is a fitcase to issue a notice under Section 148” bypassing an order. An Assessing Officer, in ouropinion, exercising power under Clause (d) ofSection 148A does not conclusively hold thatany income chargeable to tax has in factescaped assessment for any assessment year. Hesimply decides, based on the material availablebefore him, by passing an order as to whether ornot “it is a fit case to issue a notice underSection 148 of the Act”. 16. Here is not a case where theAssessing Officer did not have any informationbased on which a notice was issued to thepetitioner under Clause (b). It is not in disputethat the copy of the report of the InvestigationWing available to the Assessing Officer in theform of “not on J.M. Balanced Fund- AnnualDividend Option beneficiaries” was provided tothe petitioner well in advance on 08.08.2022. Itis not the petitioner’s case that the saidinformation/report was wholly irrelevant forexercise of power under Section 147 of the Act.We reiterate that at the stage of taking decisionunder Section 148 of the Act, the AssessingOfficer is required to form an opinion based oninformation available before him, othermaterials on record and reply of an assessee submitted under Clause (b) of Section 148A ofthe Act, regarding “fitness of a case” forissuance of notice under Section 148A of theAct. 17. It would have been differentmatter had there been no information at all orinformation available with the Assessing Officerwere though irrelevant, still the AssessingOfficer reached a conclusion that it was a fitcase for issuance of notice under Section 148 ofthe Act.” 8. We also notice the judgment of the Hon’ble Supreme Court in Union of India & Ors. v. Ashish Agarwal; (2023) 1 SCC 617, Paragraph 19 whereof is extracted hereunder :- “19. However, by way of Section 148-A, the procedure has now been streamlined andsimplified. It provides that before issuing anynotice under Section 148, the assessing officershall: (i) conduct any enquiry, if required,with the approval of specified authority, withrespect to the information which suggests thatthe income chargeable to tax has escapedassessment: (ii) provide an opportunity of beingheard to the assessee, with the prior approval ofspecified authority; (iii) consider the reply of the assesseefurnished, if any, in response to the show-causenotice referred to in clause (b); and (iv) decide, on the basis of materialavailable on record including reply of theassessee, as to whether or not it is a fit case toissue a notice under Section 148 of the IT Act;and (v) the AO is required to pass aspecific order within the time stipulated.” (i) conduct any enquiry, if required,with the approval of specified authority, withrespect to the information which suggests thatthe income chargeable to tax has escapedassessment: (ii) provide an opportunity of beingheard to the assessee, with the prior approval ofspecified authority; (iii) consider the reply of the assesseefurnished, if any, in response to the show-causenotice referred to in clause (b); and (iv) decide, on the basis of materialavailable on record including reply of theassessee, as to whether or not it is a fit case toissue a notice under Section 148 of the IT Act;and (v) the AO is required to pass aspecific order within the time stipulated.” 9. We have to look at the facts arising in the abovecase with the above interpretation of the provision under Section148A in our minds. The petitioner was issued with a noticeunder Section 131(1A) produced at Annexure-2. It has beenvery specifically stated that the notice is pursuant to verificationof the affidavits filed by the candidates contesting elections asmandated by the Election Commission of India. The disclosureof assets and liabilities were compared with the informationavailable from the records of the department and sources ofincome with respect to five aspects, with separate amountsspecified, were sought from the petitioner. The petitioner hadsupplied documents as per Annexures 3 to 6 and also as seenfrom Annexures 8 and 9. 10. A further notice (Annexure-10) was issued underSection 148A(b) of the IT Act in which the specific proposal forescaped income was with respect to the purchase of agricultureland and purchase of vehicle, as available under the column fordescription and the amounts were specified as Rs. 55,00,000/-and Rs. 33,41,277/-. We should understand from the manner inwhich the tabulation is prepared that Rs. 55,00,000/- referred to,is of the agriculture land and Rs. 33,41,277/- referred to, is ofthe purchase of vehicle. We have to immediately notice that the amounts shown does not tally with what has been separatelydetailed under Annexure-2 notice. It also does not refer to thespecific documents based on which the allegation of escapedincome is raised. Despite this, the Income Tax Authorityproceeded and passed an order under Section 148 A(d) as perAnnexure-13. In Annexure-13 it has been stated that the show-cause notice was not replied to. There is no reference toAnnexure 8, which is said to have been filed by the assessee.Based on Annexure-13 order passed under Section 148 A(d),now a notice under Section 148 of the IT Act (Annexure-14) hasbeen issued. 11. We perfectly agree with the submission of thelearned Senior Standing Counsel that an order passed underSection 148A(d) does not regulate the further proceedings underSection 148 and the prima facie satisfaction entered into by theIncome Tax Authority, in so far as the case being one fit forbeing proceeded under Section 148, cannot lead to an automaticaddition being made of the proposed unescaped income.However, when the statutory mandate is that an inquiry shouldbe conducted, if required and a notice issued, both with the priorapproval of the specified authority with supply of theinformation which prompted the initiation of the proceedings; then neither can the information supplied be meagre andhaphazard nor can the prima facie satisfaction be entered into ina mechanical manner. 11. We perfectly agree with the submission of thelearned Senior Standing Counsel that an order passed underSection 148A(d) does not regulate the further proceedings underSection 148 and the prima facie satisfaction entered into by theIncome Tax Authority, in so far as the case being one fit forbeing proceeded under Section 148, cannot lead to an automaticaddition being made of the proposed unescaped income.However, when the statutory mandate is that an inquiry shouldbe conducted, if required and a notice issued, both with the priorapproval of the specified authority with supply of theinformation which prompted the initiation of the proceedings; then neither can the information supplied be meagre andhaphazard nor can the prima facie satisfaction be entered into ina mechanical manner. 12. It is the submission of the department that thenotice under Section 131(1A) was issued based on thedeclaration made by the petitioner along with his nominationpapers. There were also documents supplied by the petitionerpursuant to the notice based on which a further notice wasissued under Section 148A(b) in which the basis of the notice isto be disclosed; the absence of which is very evident. But for thedescription of unexplained investment with respect to landedproperty and vehicle and the amount of escaped incomeproposed, nothing else was stated. It is very evident that thedetails sought for under Section 131(1A) were with respect toseparate investments made on agriculture land, inheritedcommercial land, investments made in the property belonging tothe HUF comprising of the petitioner and his family members,deposits in banks and two vehicles purchased by himself and hisson. There is no specification as to which among them wassought to be proceeded against under Section 148. 13. Further, the petitioner has now produced acorrigendum issued by the department as Annexure- 16 dated 30.05.2023. The corrigendum has more specification in so far asthe unexplained investments, with respect to purchase ofagriculture land coming to Rs. 26,72,000/- and the purchase of avehicle coming to Rs. 6,69,277/-. We cannot but notice that thecorrigendum is dated 30.05.2023 while the order passed underSection 148A(d) is dated 24.03.2023 on which date itself thenotice under Section 148 was issued; the latter two documentshaving been produced as Annexure-13 and Annexure-14. Hence,obviously, there is infirmity and illegality in the order passedunder Section 148A(d) which vitiates the further notice issuedunder Section 148. 14. The corrigendum issued more than two monthsafter the order under Section 148A(d) vitiates the order beyondrepair. We also notice that sufficient material regarding theassets on which investments are alleged to have been made havealso not been disclosed in the notice under Section 148A(b). Ifan agriculture land is referred to, it is only proper that thedescription along with the details of the location as also thespecification of the deed by which the acquisition was madeshould be informed to the assessee. Similarly in the case of avehicle, the Registration Number and the details are to besupplied. Only such information supplied would enable the assessee to make an effective reply; even if the said investmentsare picked out from the assets and liabilities declared by theassesse based on which the proceedings were initiated. Wehence set aside Annexures 10, 13 and 14. We make it clear thatthe Assessing Officer would be entitled to initiate freshproceedings subject to just exceptions. 15. The writ petition is allowed leaving liberty as above. (K. Vinod Chandran, CJ) (Partha Sarthy, J) P.K.P./-. AFR/NAFRAFRCAV DATEUploading Date05.10.2023Transmission Date