Saroj Chandna v. Income Tax Officer Ward 70 (1)New Delhi And Ors

$~235 IN THE HIGH COURT OF DELHI AT NEW DELHI +W.P.(C) 11676/2022 and CM APPL. Nos. 34738-39/2022 SAROJ CHANDNA ..... PetitionerThrough:Mr.C.S.Aggarwal,SeniorAdvocate with Mr. Ravi PratapMall, Mr. Uma Shankar andMr.MahirAggarwal,Advocates. versus INCOME TAX OFFICER WARD 70 (1)NEW DELHI AND ORS ..... RespondentsMr.RuchirBhatia,SeniorStandingCounselfortheRevenuealongwithMs.Mansie Jain, Advocate. Through: % Reserved on: 17[th]August, 2022Date of Decision: 30[th]August, 2022 CORAM: HON'BLE MR. JUSTICE MANMOHAN HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMEET PRITAM SINGH ARORA, J: CM APPL. 34739/2022 (for exemption) Exemption allowed, subject to all just exceptions. Accordingly, the application stands disposed of. W.P.(C) 11676/2022 and CM APPL. 34738/2022 (for ad-interimex-parte relief) 1.The present writ petition has been filed inter alia praying asunder : b) That this Hon'b1e High Court be pleased to quash theimpugned order dated 22.07.2022 passed u/s 148A(d) for theA.Y. 2013-14 wherein the objections against the reassessmentproceedings have been disposed-off and consequently noticedated 22.07.2022 u/s 148 of the Income Tax Act, 1961 wasissued against the Petitioner for the A.Y. 2013-14; c) That this Hon'b1e High Court be pleased to pass a writ ofand/or order and/or direction in the nature of prohibitioncommanding Respondents to forebear from giving effect toand/or taking any step whatsoever pursuant to and/or infurtherance of the said purported notice under section 148 ofthe Income Tax Act 1961 and/or in any proceedings initiatedthereunder for the A.Y 2013-14; d) That this Hon'ble High Court be pleased to hold that theCBDT Instruction No. 01/2022, dated 11.5.2022 authorizingthe revenue to initiate the reassessment proceedings for theA.Y. 2013-14 is ultra-virus/bad in law, to the First Proviso tosubstituted/new section 149 of the Income Tax Act, 1961; 2.Learned Senior Counsel for the petitioner stated that thepetitioner was served with a notice dated 19[th]April, 2021, underSection 148 of the Income Tax Act, 1961 (‘the Act’) seeking toinitiate reassessment proceedings with respect to Assessment Year(‘AY’) 2013-14. He stated that the petitioner herein sought from theAssessing Officer (‘AO’) i.e. the respondent No. 1, the ‘reasons tobelieve’ for issuing the notice dated 19[th]April, 2021. In theinformation furnished to the petitioner, the basis of forming ‘reasonsto believe’ was set-out as under : “Reasons for reopening of the assessment u/s 147 of the Income TaxAct, 1961. 4.Enquiries made by the AO as sequel to informationcollected/received:Necessary verification was made fromthe entire details available on records and database of ITBAand ITD and it has been observed that the assessee hasentered into significant financial transactions i.e. CASHDEPOSITSAGGREGATINGTOLARGEAMOUNTIMMEDIATELY WITHDRAWN IN CASH FROM ATM to thetune of Rs. 5000000 during the year under consideration i.e,F.Y. 2012-13 relevant to A.Y. 2013-14 but same is notcommensurate with the information therefore, I have reasonto believe that after due application of all the facts and mindthe said amount i.e. Rs. 5000000 has escaped income.” 3.He stated that since the notice dated 19[th]April, 2021 had beenissued without following the mandatory procedure prescribed underSection 148A of the Act, the petitioner approached this court in writproceedings in W.P.(C) No. 323/2022 and the notice dated 19[th]April,2021 was quashed by this court following the judgment in MonMohan Kohli vs. Assistant Commissioner of Income Tax & Anr.(2022) 441 ITR 207. 3.He stated that since the notice dated 19[th]April, 2021 had beenissued without following the mandatory procedure prescribed underSection 148A of the Act, the petitioner approached this court in writproceedings in W.P.(C) No. 323/2022 and the notice dated 19[th]April,2021 was quashed by this court following the judgment in MonMohan Kohli vs. Assistant Commissioner of Income Tax & Anr.(2022) 441 ITR 207. 4.He stated that however, in pursuance to the judgment of theSupreme Court in the case of Union of India & Ors. vs. AshishAgarwal reported in [2022] 444 ITR 1, the petitioner herein wasserved with a notice dated 17[th]May, 2022, furnishing the informationand material relied upon by the AO for issuance of the notice dated19[th]April, 2021. The contents of the information provided therein readas under: “The relevant information/material in your case' is as under:- 1. AsperinformationprovidedbytheDirectorateofInvestigation through Income tax Insight Portal, during thefinancial year 2012-13 relevant to assessment year 2013-14, youhave entered into financial transactions i.e. deposited cashamount to RS.50,00,000/- in current account and immediatelywithdrawn in cash from ATM.” 5.He stated that the petitioner promptly replied to the notice dated17[th]May, 2022 by filing a detailed reply dated 24[th]May, 2022 alongwith all the relevant documents. The reply clarified that the materialset-out in the notice dated 17[th]May, 2022 did not pertain to thepetitioner herein since during the relevant Financial Year (‘FY’) thepetitioner had not carried-out any financial transactions relating todeposit of cash in her current account. The petitioner furthercategorically denied that she had withdrawn any such cash by usingthe ATM. In this regard, it was stated that the petitioner does notpossess any Debit Card and therefore, she is not in a position to use anATM as alleged. The petitioner to substantiate the aforesaid stand dulyannexed her Bank Statement and a Certificate from her banker to theeffect that no Debit Card has been issued, with the reply. It is thecontention of the petitioner that after submission of reply dated24[th]May, 2022, the AO had time until 30[th]June, 2022 to pass theorders under Section 148A(d) of the Act. 6.He contended that the AO however, instead of passing theorder, issued a further notice dated 23[rd]June, 2022 setting-out therein,entirely new facts for justifying the issuance of the previous notices.The explanation provided in this notice dated 23[rd]June, 2022 reads as under: “Sir/Madam/M/s, Subject:Letter/Order u/s 148A in view of any direction ofHon’ble Courts-Letter This is in continuation of proceedings u/s 148A(d) of the Act and yoursubmission dated 23.05.2022. Vide your submission you haverequested to provide such material and information and, not merelyvague assertion for rebuttal by the assessee. In this case, cash is deposited in the account of Sh. Raj Kumar Singhmaintained with Indusind Bank Kankurgachhi branch Kolkata.Perusal of bank statement of Shri Raj Kumar Singh, on investigation,found that the accounts get credited with high value of cash depositedduring the F.Y. 2012-13 and the proceeds were immediatelywithdrawn in cash from ATMs, cheque issuance, fund transfer andRTGS. The amount credited in the account of Shri Raj Kumar wereimmediately transferred to shell entities namely Mis SubhijayProperties advisory Pvt Ltd., M/s Sensex Distributor Pvt Ltd., M/sRainbow Plant and Machinery Traders Pvt. Ltd. and M/s SubshreeFinancial Management Pvt. Ltd. for layering of fund and thenultimately to the bank accounts of the concerned beneficiaries. In this case, cash is deposited in the account of Sh. Raj Kumar Singhmaintained with Indusind Bank Kankurgachhi branch Kolkata.Perusal of bank statement of Shri Raj Kumar Singh, on investigation,found that the accounts get credited with high value of cash depositedduring the F.Y. 2012-13 and the proceeds were immediatelywithdrawn in cash from ATMs, cheque issuance, fund transfer andRTGS. The amount credited in the account of Shri Raj Kumar wereimmediately transferred to shell entities namely Mis SubhijayProperties advisory Pvt Ltd., M/s Sensex Distributor Pvt Ltd., M/sRainbow Plant and Machinery Traders Pvt. Ltd. and M/s SubshreeFinancial Management Pvt. Ltd. for layering of fund and thenultimately to the bank accounts of the concerned beneficiaries. It is established beyond doubt that the asseseee i.e., Saroj Chandna isone of the beneficiaries of the entries routed between the account ofShri Raj Kumar Singh and the above shell companies. The beneficiarycompanies have brought back their unaccounted income into theregular books of account in the guise of in the case of bogus sharecapital, share premium, unsecured loan etc. There was no otherfinancial rationale behind the setransaction. Saroj Chandna hasreceived an amount of Rs.50,00,000/- from Mis Subshree FinancialManagement Pvt. Ltd during the F.Y. 2012-13. You are therefore requested to explain the nature of transactionentered with the above company and also as to why the said -transaction i.e. receipts of Rs.50,00,000/ in your bank account shouldnot treated as accommodation entry from unaccounted funds.” (Emphasis supplied) 7.He stated that AO could not have issued the aforesaid noticeunder Section 148A(b) of the Act, after 17[th]May, 2022. He stated thatcontents of notice dated 23[rd]June, 2022 is distinct from the ‘reasons tobelieve’ dated 27[th]March, 2021 and the contents of the notice dated17[th]May, 2022. 8.In the notice dated 23[rd]June 2022, the AO sought anexplanation from the petitioner for receipt on an amount ofRs.50,00,000/- (Rupees Fifty Lacs) from an entity namely M/sSubhshree Financial Management Pvt. Ltd. during the relevantFinancial Year. The petitioner replied to the aforesaid notice vide herreply dated 28[th]June, 2022 and responded to the said allegationsspecifically as under : “15.The assessee further submits that even today nomaterial whatsoever had been furnished in support of yourallegation as contained in your notice dated 23.06.2022 andpurported to be "Letter/Order u/s 148A in view of anydirection of Hon'ble Courts - Letter". It is submitted theaforesaid facts clearly shows a complete non-application ofmind and the proceedings have been initiated against theassessee for the purpose of making any roving and fishingenquiry without existence of any material.It is respectfullyadditionally submitted and without prejudice to the aforesaidsubmission, that even in your notice dated 23.06.2022, it hadbeen stated that 'it is established beyond doubt that the assesseeis one of the beneficiaries of the entries routed between theaccount of Shri Raj Kumar Singh and the above shellcompanies'. It is submitted in response to the same that no date of receipt of any sum has been stated other than stating that the-assessee had received an amount of Rs.50,00,000/from M/sSubhshree Financial Management Pvt. Ltd. during the FY2012-13. No specific date has been provided in the notice norany material has been furnished in support of the allegation. Inthe absence thereof it is obvious the assessee is unable tofurnish any such rebuttal to the allegation.” (Emphasis supplied) 9.He stated that the petitioner has now been served on 22[nd]July,2022 with the impugned order under Section 148A(d) of the Actwhich solely relies upon the information which was contained in thenotice dated 23[rd]June, 2022 and on that basis, the AO has concludedthat a transaction amounting to Rs.50,00,000/- (Rupees Fifty Lacs) hasescaped assessment. of receipt of any sum has been stated other than stating that the-assessee had received an amount of Rs.50,00,000/from M/sSubhshree Financial Management Pvt. Ltd. during the FY2012-13. No specific date has been provided in the notice norany material has been furnished in support of the allegation. Inthe absence thereof it is obvious the assessee is unable tofurnish any such rebuttal to the allegation.” (Emphasis supplied) 9.He stated that the petitioner has now been served on 22[nd]July,2022 with the impugned order under Section 148A(d) of the Actwhich solely relies upon the information which was contained in thenotice dated 23[rd]June, 2022 and on that basis, the AO has concludedthat a transaction amounting to Rs.50,00,000/- (Rupees Fifty Lacs) hasescaped assessment. 10.The learned Senior Counsel for the petitioner contended that theimpugned order dated 23[rd]July, 2022 is barred by limitation undersection 148A(d) of the Act. He stated the last date available to the AOfor passing the impugned order under Section 148A(d) of the Act was30[th]June, 2022, since the petitioner had filed her reply on 24[th]May,2022. 11.He further contended that without prejudice to his aforesaidsubmissions, the contents of the order dated 22[nd]July, 2022 do notsatisfy the test of Section 149(1)(b) of the Act, inasmuch as, the AOdoes not have in his possession any books of accounts of the petitionerand the allegation pertaining to credit of Rs.50,00,000/- (Rupees FiftyLacs) received from M/s Subhshree Financial Management Pvt. Ltd. isnot an ‘asset’ within the meaning of Section 149(1)(b) of the Act. In this regard, he relied upon the judgments in (i) 41 ITR 191 (SC)Calcutta discount Co. Ltd. vs. ITO; (ii) 338 ITR 563 (DEL)Commissioner of Income Tax, Delhi Vs. MS. Mayawati; (iii)141 ITR67 (Bom) Commissioner of Income Tax, Poona Vs. Bhaichand H.Gandhi. 12.He thus, summarized his submissions as below :12.1. No notice under Section 148A(b) of the Act could have beenissued to the petitioner for the relevant assessment year beyond 30[th]June, 2021. The procedure adopted by AO by issuing notice dated 23[rd]June, 2022 is contrary to the directions contained in the judgment ofthe Supreme Court in Ashish Agarwal (supra); 12.2. The contents of the notice dated 23[rd]June, 2022 are materiallydifferent from the contents of the notice dated 17[th]May, 2022. Ittherefore, necessarily gives rise to the conclusion that no informationwas available with the AO on 27[th]March, 2021 when the initial noticedated 19[th]April, 2021 was issued and on 17[th]May, 2022. He statedthat it is impermissible for the AO to set-up a new case by issuing anotice dated 23[rd]June, 2022 and the petitioner had been denied anymeaningful opportunity to respond to the contents of the notice dated23[rd]June, 2022. 13.Issue notice. 14.Mr. Ruchir Bhatia, learned Senior standing counsel acceptednotice and submitted that notice dated 23[rd]June, 2022 was issued bythe AO in continuation of the material and information provided to thepetitioner on 17[th]May, 2022. He submitted that the petitioner herselfhad requested for better particulars in her reply dated 24[th]May, 2022 and therefore, the AO provided these particulars as per the request ofthe petitioner. He submitted that as per the information available withthe Income Tax Department, M/s Subhshree Financial ManagementPvt. Ltd. is an accommodation entry provider. In this regard, hesubmitted that the Bank Statement furnished by the petitioner dulyreflects the transaction between the petitioner and M/s SubhshreeFinancial Management Pvt. Ltd. He submitted that in the reply dated28[th]June, 2022, the petitioner despite being confronted with thetransaction has not offered any explanation with respect to the natureof transaction between the petitioner and M/s Subhshree FinancialManagement Pvt. Ltd. and in fact, the reply is willfully evasive. and therefore, the AO provided these particulars as per the request ofthe petitioner. He submitted that as per the information available withthe Income Tax Department, M/s Subhshree Financial ManagementPvt. Ltd. is an accommodation entry provider. In this regard, hesubmitted that the Bank Statement furnished by the petitioner dulyreflects the transaction between the petitioner and M/s SubhshreeFinancial Management Pvt. Ltd. He submitted that in the reply dated28[th]June, 2022, the petitioner despite being confronted with thetransaction has not offered any explanation with respect to the natureof transaction between the petitioner and M/s Subhshree FinancialManagement Pvt. Ltd. and in fact, the reply is willfully evasive. 15.He stated that since the value of transaction is Rs.50,00,000/-(Rupees Fifty Lacs) it would be saved under Section 149(1)(b) of theAct and is not barred by limitation. He relied upon the Explanation ofthe phrase ‘asset’ in the said section and submitted that ‘asset’specifically includes the deposit in the assessee’s Bank Account. Hetherefore submitted that the credit of Rs.50,00,000/- (Rupees FiftyLacs) received by the petitioner from M/s Subhshree FinancialManagement Pvt. Ltd. is duly covered by this provision. 16.In rejoinder, the learned counsel for the petitioner stated that asis evident from petitioner’s Bank Statement, there were multipleentries with M/s Subhshree Financial Management Pvt. Ltd. duringthe relevant Financial Year and in the absence of any specific Entrybeing identified in the notice dated 23[rd]June, 2022, it was impossiblefor the petitioner to explain the said entry. He submitted that in thewrit petition, the petitioner has now set-out at Ground ‘N’ and Ground ‘O’ that the said transaction was a loan transaction between thepetitioner and M/s Subhshree Financial Management Pvt. Ltd., whichsum has since been returned. 17.Learned counsel for the petitioner in rejoinder contended thatthe ‘limited issue’ on which he seeks to maintain the writ petition waswhether the AO could have furnished particulars on 23[rd]June, 2022 orwas such an option foreclosed to the AO. It is his contention that afterthe exchange of the notice dated 17[th]May, 2022 and assessee’s replydated 24[th]May, 2022, the AO, in exercise of his jurisdiction underSections 148A(c) and 149A(d) of the Act could have only proceededto pass a final order and it was impermissible for him to have issuednotice dated 22[nd]June, 2022. 18.The petitioner did not address any arguments on the challengeto the CBDT Instruction No. 01/2022, dated 11[th]May, 2022 and thesame has not been examined by us. 19.We have heard learned counsel for the parties. We are thereforein this writ concerned only with the validity of the AO’s action inissuing the notice dated 23[rd]June 2022. We are unable to accept thecontention of learned counsel for the petitioner that the AO wasprecluded from providing the information set out in the notice dated23[rd]June, 2022. In the impugned order, the AO has noted thatinformation contained in the notice dated 23[rd]June, 2022 was providedto the petitioner upon her request for further material as per her replydated 23[rd]May, 2022. The impugned order specifically identifies thatthe transaction of the petitioner with M/s Subhshree FinancialManagement Pvt. Ltd. dated 10[th]August, 2012 is subject matter of notices. 20.This Court has consistently observed that to give effect to theobjective of the scheme of Section 148A of the Act, the AO mustprovide specific material and information to the assessee at the stageof Section 148A(b) of the Act so that the assessee can provide ameaningful response at the stage of inquiry under Section 148Aproceedings. The following observation of this Court in its decisionof Divya Capital One Private Limited v. ACIT & Ors. Cited at 2022SCC OnLine Del 1461, while dealing with proceedings under Section148A of the Act are apposite: notices. 20.This Court has consistently observed that to give effect to theobjective of the scheme of Section 148A of the Act, the AO mustprovide specific material and information to the assessee at the stageof Section 148A(b) of the Act so that the assessee can provide ameaningful response at the stage of inquiry under Section 148Aproceedings. The following observation of this Court in its decisionof Divya Capital One Private Limited v. ACIT & Ors. Cited at 2022SCC OnLine Del 1461, while dealing with proceedings under Section148A of the Act are apposite: “11.ThisCourtfurtherfindsthattheinformation/material stated in the impugned show causenotice dated 17th March, 2022 issued under Section148A(b) of the Act have not been shared with thePetitioner, despite specific request made by the Petitionervide letter dated 24th March, 2022, thereby denying thePetitioneraneffectiveopportunitytofilearesponse/reply. The non-sharing of the information isviolative of the rationale behind the judgment of thisCourtinSabhInfrastructureLtd.vs.Asst.CIT,MANU/DE/2989/2017 : 398 ITR 198 (Del).”information/material stated in the impugned show causenotice dated 17th March, 2022 issued under Section148A(b) of the Act have not been shared with thePetitioner, despite specific request made by the Petitionervide letter dated 24th March, 2022, thereby denying thePetitioneraneffectiveopportunitytofilearesponse/reply. The non-sharing of the information isviolative of the rationale behind the judgment of thisCourtinSabhInfrastructureLtd.vs.Asst.CIT,MANU/DE/2989/2017 : 398 ITR 198 (Del).” 21.In the facts of the present case as well, the petitioner in herreply dated 24[th]May, 2022, had while highlighting that the assertionsof the AO in the notice dated 17[th]May, 2022 were vague hadspecifically sought better material and information from AO to enablea rebuttal. In these circumstances the issuance of notice dated 23[rd]June, 2022 furnishing specific details of the transaction, which as perAO is subject matter of the notice dated 17[th]May, 2022 cannot befaulted. A perusal of the notice dated 23[rd]June, 2022 and impugned order dated 22[nd]July, 2022 shows that as per the AO the details of thetransaction which form the basis of the notices dated 19[th]April, 2021and 23[rd]June, 2021 are same. It is the case of the respondent that thesaid material was available on record and the said form the basis of theinquiry, when the initial notice dated 19[th]April, 2021 was issued.22.Pertinently, the petitioner has not offered any explanation forthe transaction(s) entered with M/s Subhshree Financial ManagementPvt. Ltd. Limited in the relevant financial year in her reply dated 27[th]June, 2022. In the absence of any explanation offered in her reply, wedo not find any error in the impugned order issued by the AO. 23.We also do not agree with the contention of the petitioner thatshe was denied an opportunity to respond to the allegations made inthe notice dated 23[rd]June, 2022. The petitioner filed a detailed replyon 28[th]June, 2022 but elected not to explain or substantiate thetransaction between the petitioner and M/s Subhshree FinancialManagement Pvt. Ltd. The petitioner having elected to not furnish thesaid information cannot contend that she was denied an opportunity ofhearing. 24.The petitioner does not dispute that there were transactionsbetween petitioner and M/s Subhshree Financial Management Pvt.Ltd. in the relevant Financial Year. With respect to the petitioner’scontention in the writ petition that this transaction was a loantransaction and it stood repaid, the same is a bare averment,unsubstantiated and it is neither evident from the record nor can thisfact be determined in these proceedings, when the allegation of theDepartment is that it was an accommodation entry. The said 24.The petitioner does not dispute that there were transactionsbetween petitioner and M/s Subhshree Financial Management Pvt.Ltd. in the relevant Financial Year. With respect to the petitioner’scontention in the writ petition that this transaction was a loantransaction and it stood repaid, the same is a bare averment,unsubstantiated and it is neither evident from the record nor can thisfact be determined in these proceedings, when the allegation of theDepartment is that it was an accommodation entry. The said submission of the petitioner will be examined by the AO in theassessment proceedings after perusing the material furnished by thepetitioner.Thereply dated27[th]June,2022offerednosuchexplanation, much less the above explanation for the transaction.25.Consequently, at this stage, this Court finds no infirmity in theimpugnedorderpassedbytheAssessingOfficer.Accordingly, the present writ petition and application are dismissed.26.We make it clear that we have not expressed any opinion on themerits of the controversy and all rights and contentions of thepetitioner are left open. MANMEET PRITAM SINGH ARORA, J MANMOHAN, J AUGUST 30, 2022j