+W.p.(C) v. Income Tax Department Ward 43 6 Delhi

$~54 IN THE HIGH COURT OF DELHI AT NEW DELHI +W.P.(C) 16117/2024 & CM APPL. 67709/2024 (interim directions)TARUN DUA .....Petitioner Through:Mr. Satpal Singh, Mr. Gaurav Gupta,Mr. Rupal Gupta and Ms. LakshikaKaushik, Advocates versus INCOME TAX DEPARTMENT WARD 43 6 DELHI ....Respondent Through:Counsel (appearance not given) CORAM: HON'BLE MR. JUSTICE VIBHU BAKHRUHON'BLE MS. JUSTICE SWARANA KANTA SHARMA O R D E R%21.11.2024 CM APPL. 67710/2024 (Exemption) 1.The application is allowed, subject to all just exceptions. 2.The application is, accordingly, disposed of. W.P.(C) 16117/2024 3.Issue notice. 4.The learned counsel appearing for the respondent accepts notice.5.The petitioner has filed the present petition impugning an order dated01.03.2024 (hereafter the impugned order) passed under Section 148A(d) ofthe Income Tax Act, 1961 (hereafter the Act) as well as a notice dated01.03.2024 (hereafter the impugned notice) the issued under Section 148 ofthe Act in respect of the assessment year (AY) 2017-18. 6.The petitioner had filed his return of income under Section 139(1) of the Act in respect of the AY 2017-18 on 27.09.2017. The said return was notpicked up for scrutiny. However, subsequently on 30.06.2021, the AssessingOfficer (hereafter AO) issued a notice under Section 148 of the Act seekingto re-open the assessment for AY 2017-18. Pursuant to the said notice, thepetitioner’s income was re-assessed and an assessment order dated20.04.2023 was passed, accepting the petitioner’s returned income for theAY 2017-18. The said assessment order indicates that the AO hadinformation from the investigation wing that the petitioner had availed ofbogus long term capital gains through reputed stocks by issuing ante-datedforged contract for a value of ₹64,06,508/-. The petitioner had contested the said allegation by producing a copy of its Demat Account, contract notes forsale of shares and complete documents for the purchase of shares inquestion. The petitioner had substantiated his claim that he had purchased5300 shares of Indusind Bank Ltd. at the rate of ₹27.49 on 06.03.2009 amounting to ₹1,45,697/-. The said shares were thereafter, sold on 29.09.2016, resulting in long term capital gains of ₹62,06,605/-. 7.The AO had thereafter, issued a notice dated 20.02.2024 underSection 148A(b) of the Act, once again seeking to re-open the petitioner’sassessment for the AY 2017-18. The annexure to the said notice indicated alist of transactions which, according to the AO, were suggestive of thepetitioner’s income escaping assessment. The said tabular statement settingout the transactions is reproduced below: 8.The petitioner responded to the said notice on 23.02.2024 stating that the transactions as referred to in the notice were duly declared in the returnof income filed by the petitioner and some of the transactions were alsorepeated twice over. Insofar as the information regarding bogus long termscapital gains amounting to ₹64,06,508/- is concerned, the petitioner informed the AO that the same had been examined in the earlier round ofproceedings held under Section 147 of the Act. 9.The AO passed the impugned order dated 01.03.2024 under Section148A(d) of the Act, inter alia, holding that it was a fit case to issue a noticeunder Section 148 of the Act. The AO’s reasoning for rejecting thepetitioner’s response to the notice under Section 148A(b) of the Act is setout below: 8.The petitioner responded to the said notice on 23.02.2024 stating that the transactions as referred to in the notice were duly declared in the returnof income filed by the petitioner and some of the transactions were alsorepeated twice over. Insofar as the information regarding bogus long termscapital gains amounting to ₹64,06,508/- is concerned, the petitioner informed the AO that the same had been examined in the earlier round ofproceedings held under Section 147 of the Act. 9.The AO passed the impugned order dated 01.03.2024 under Section148A(d) of the Act, inter alia, holding that it was a fit case to issue a noticeunder Section 148 of the Act. The AO’s reasoning for rejecting thepetitioner’s response to the notice under Section 148A(b) of the Act is setout below: “...6. The reply of the assessee has been examined with respectto information received on Insight Portal. On perusal ofAssessment Order and reasons recorded by erstwhile AssessingOfficer it is found that the information received from InsightPortal in respect of bogus LTCG of Rs. 64,06,508/- has alreadybeen covered in Assessment Order dated 16.01.2023. It ispertinent to mention that the assessee has been given benefit ofexempt income u/s 1 0(38) of the IT Act, of Rs. 62,06,605/- asLong Term Capital Gain on sale of shares of Rs. 64,06,508/. Itis pertinent to mention that in the present information sale ofshares of Rs. 63,81,889/- has not been covered in assessmentorder.Theremainingamount1sRs.97,30,434/-(Rs.1,61,36,942- 64,06,508/-). A.Y. 2017-18 which is more thanthreshold amount of Rs. 50 lacs and is represented in the formof "asset" (Shares and securities and entries in books ofaccount) as per section 149(1)(b) of the Income Tax Act, 1961has escaped assessment in the hands of the assessee.to information received on Insight Portal. On perusal ofAssessment Order and reasons recorded by erstwhile AssessingOfficer it is found that the information received from InsightPortal in respect of bogus LTCG of Rs. 64,06,508/- has alreadybeen covered in Assessment Order dated 16.01.2023. It ispertinent to mention that the assessee has been given benefit ofexempt income u/s 1 0(38) of the IT Act, of Rs. 62,06,605/- asLong Term Capital Gain on sale of shares of Rs. 64,06,508/. Itis pertinent to mention that in the present information sale ofshares of Rs. 63,81,889/- has not been covered in assessmentorder.Theremainingamount1sRs.97,30,434/-(Rs.1,61,36,942- 64,06,508/-). A.Y. 2017-18 which is more thanthreshold amount of Rs. 50 lacs and is represented in the formof "asset" (Shares and securities and entries in books ofaccount) as per section 149(1)(b) of the Income Tax Act, 1961has escaped assessment in the hands of the assessee. 7. Considering the above and on the basis of material availableon record, it is a fit case to issue a notice under section 148 ofthe Income Tax Act, 1961.on record, it is a fit case to issue a notice under section 148 ofthe Income Tax Act, 1961. This Order is being passed with prior approval of ChiefCommissioner of Income Tax-3, Delhi. Notice u/s 148 of theIncome Tax Act, 1961 is issued alongwith this Order.” 10.We are at a loss to understand the aforesaid reasoning. Theassessment order dated 20.04.2023 clearly indicates that the petitioner’sexplanation for long term capital gains amounting to ₹64,06,508/- was duly examined and accepted by the AO. Apart from a bald allegation that thelong-term capital gains claimed by the Assessee were bogus entries, there isno material to substantiate the said allegation. 11.Notwithstanding the same, the AO has proceeded to hold that “thepresent information relating to the sale of shares of ₹63,81,889/- has not been covered in the assessment order. It is apparent that the AO has failed toapply his mind to the assessment order, which is already on record. 10.We are at a loss to understand the aforesaid reasoning. Theassessment order dated 20.04.2023 clearly indicates that the petitioner’sexplanation for long term capital gains amounting to ₹64,06,508/- was duly examined and accepted by the AO. Apart from a bald allegation that thelong-term capital gains claimed by the Assessee were bogus entries, there isno material to substantiate the said allegation. 11.Notwithstanding the same, the AO has proceeded to hold that “thepresent information relating to the sale of shares of ₹63,81,889/- has not been covered in the assessment order. It is apparent that the AO has failed toapply his mind to the assessment order, which is already on record. 12.Other than the transaction of sale of shares of a value of ₹ 64,06,508/-, the information as set out in the notice under Section 148A(b) of the Actdoes not mention any other shares or any other transaction leading to longterm capital gains. The only transaction referred to in the notice relating tolong term capital gains is expressed as “bogus LTCG through reputed stocksby showing ante dated forged contract notes” of a value of ₹64,06,508/-. This is precisely the same information that had triggered the earlier re-assessment proceedings. 13.Insofar as the information regarding other transactions is concerned, itis the petitioner’s case that the same were a part of his return. The petitionerhas also filed the computation of his income, which was a part of his return.The same, prima facie, reflects that the other transactions as mentioned inthe notice under Section 148A(b) of the Act were disclosed. 14.None of the contentions advanced by the petitioner were consideredby the AO, including the claim that the entry regarding TDS of ₹7,35,000/- has been mentioned twice over in the said notice. Prima facie, the same is evident from the information as set out in the notice under Section 148A(b)of the Act itself as it reflects TDS statement pertaining to the salary ofemployees at ₹7,35,000/- twice. 15.In view of the above, we allow the present petition and set aside thenotice dated 20.02.2024 issued under Section 148A(b) of the Act; theimpugned order dated 01.03.2024 passed under Section 148A(d) of the Actas well as the impugned notice dated 01.03.2024 issued under Section 148of the Act. 16.We, however, clarify that this order will not preclude the AO fromissuing a fresh notice under Section 148A(b) of the Act, subject to therebeing any information, which is suggestive of the petitioner’s incomeescaping assessment for the relevant assessment year. 17.Needless to state that before issuing any such notice, the AO isrequired to apply its mind to the material already on record. 18.The petition is allowed in the aforesaid terms. Pending applicationsalso stand disposed of. VIBHU BAKHRU, J NOVEMBER 21, 2024 ns SWARANA KANTA SHARMA, J Click here to check corrigendum, if any