Wp(C)/31020/2022 Of Kavumkal Road Builders v. Ashish Agarwal

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH TUESDAY, THE 16 DAY OF JANUARY 2024 / 26TH POUSHA, 1945 W.P.(C) NO.31020 OF 2022 PETIT IONER: KAVUMKAL ROAD BUILDERS, CHEMBANOLI P.O., VECHOOCHIRA, PATHANAMTHITTA REPRESENTED BY ITS MANAGING PARTNER MR. SABU KURIAKOSE BY ADV. RAMESH CHERIAN JOHN RESPONDENT: THE INCOME TAX OFFICER, WARD 1 & TPS, VAISHNAVAM ARCADE, T.K. ROAD, THIRUVALLA COMING UNDER OFFICE OF THE JOINT COMMISSIONER OF INCOME TAX, RANGE 1, KOTTAYAM, PIN-689 101. SRI. JOSE JOSEPH, STANDING COUNSEL THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON16.01.2024, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C) NO.31020 OF 2022 JUDGMENT Dated this the 16[th] day of January, 2024 Heard Sri. Joseph Markose, learned Senior Counsel assisted by Sri. Ramesh Cherian John, learned counsel forthe petitioner and Sri. Jose Joseph, learned SeniorStanding Counsel for the Income Tax Department onbehalf of the respondents. 2.The petitioner is a partnership firm and isengaged in contract work relating to construction of roadsand bridges. The petitioner is an assessee under theprovisions of the Income Tax Act, 1961 ('the Act' forshort). 3.The petitioner did not file return of income forthe assessment year 2015-2016. As per the individualtransaction statement available in AST system, in respectof the financial year 2014-2015, the petitioner hadreceived Rs.1,80,04,141/- by way of contract receipt andother sources. The case of the petitioner wasre-opened under Section 147 of the Act, after taking W.P.(C) NO.31020 OF 2022 prior approval from the Additional Commissioner ofIncome Tax and notice under Section 148 was issued tothe assessee on 12.09.2017. The petitioner, in response tothe notice issued under Section 148 of the Act, filed itsreturn of income on 07.08.2018, declaring total income atRs.31,87,660/-. The petitioner was issued notice underSection 143(2) and further notice was issued underSection 142(1) of the Act. The details/informationnecessary for completing the assessment were called forfrom the petitioner. In response to the said notice,Sri. Iype John, FCA authorised representative of theassessee from M/s. Cherian & Cherian attended the caseon 13.11.2018 and subsequent dates and filed BalanceSheet, Profit and Loss Account, copy of VAT return andbank statements. Vide order sheet entry dated 13.11.2018,the petitioner was asked to produce the confirmation fromsundry creditors. Vide letter dated 21.11.2018,the petitioner furnished the confirmation fromM/s. Kavumkal Granites Pvt. Limited, a sister concern ofthe petitioner. W.P.(C) NO.31020 OF 2022 4.A survey under Section 133A of the Act wascarried out at the business premises of the assessee firmon 12.02.2015. As a result of survey, income was offeredat 8% of total contract receipts for the assessment years2012-2013, 2013-2014 and 2014-2015. On verification ofthe details furnished by the assessee, it was noticed thatthe petitioner had incurred expenses to the tune ofRs.66,534/- only. The assessment order came to befinalised at income of Rs.41,47,200/- under Section 143(3)of the Act. 5.After the assessment order was finalised inExt.P1 on 24.12.2018, notice under Section 148 wasissued to the petitioner on 22.06.2021 on the ground thatthe assessing officer had a reason to believe that thepetitioner's income, chargeable to tax for the assessmentyear 2015-2016, had escaped the assessment within themeaning of Section 147 of the Act. The petitionerchallenged the said notice by filing W.P.(C) No.29442 of2021. After the Honourable Supreme Court passed thejudgment inUnion of India vs Ashish Agarwal W.P.(C) NO.31020 OF 2022 5.After the assessment order was finalised inExt.P1 on 24.12.2018, notice under Section 148 wasissued to the petitioner on 22.06.2021 on the ground thatthe assessing officer had a reason to believe that thepetitioner's income, chargeable to tax for the assessmentyear 2015-2016, had escaped the assessment within themeaning of Section 147 of the Act. The petitionerchallenged the said notice by filing W.P.(C) No.29442 of2021. After the Honourable Supreme Court passed thejudgment inUnion of India vs Ashish Agarwal W.P.(C) NO.31020 OF 2022 (2022 SCC Online SC 543), the proceedings taken underSection 148 before 01.04.2021, was not finalised and thesame proceedings were directed to be initiated underSection 148A and therefore, the assessing authority had toproceed under the amended provisions of Section 148A ofthe Income Tax Act. Notice was issued to the petitionerunder Section 148A(d) directing the petitioner to showcause within two weeks of receipt of thecommunication/letter dated 23.05.2022 as to why an orderunder Section 148A(d) should not be passed. Only it is a fitcase for issuance of notice under Section 148 of the Act. 6.The petitioner filed a reply to the said noticedated 23.05.2022. The re-opening of the assessmentfinalised on 24.12.2018 would amount to a 'change ofopinion' and such a course is not applicable to theassessing authority. 7.The said facts were considered and the orderunder Section 148A(d) has been passed on 31.08.2022,which is under challenge before this Court. The decisionto re-open the assessment based on two factors had W.P.(C) NO.31020 OF 2022 mentioned in the show cause notice issued under Section 148A(d) of the Act and informing the opinion that thepetitioner's income chargeable to tax had escaped theassessment. The two factors are as follows:- i) There appears to be a mismatch between theamount of Rs.2,45,57,271/- shown as sundrycreditors in the books of the assessee and theamount of Rs.72,73,801/- shown as 'tradereceivable in the books of the creditor'M/s. Kavumkal Granites Pvt. Ltd. Hence, theliability of Rs.2,45,57,271/- shown as sundrycreditors in the Balance Sheet of the assesseestands unexplained. ii) Also in the P&L A/c, the assesee has debited anamount of Rs.21,77,996/- as VAT. An amount ofRs.5,34,279/- is shown as VAT deducted (TDS). Asper the e-Annual VAT Return for the FY 2014-15 isan amount for Rs.5,32,652/- is seen as VAT due oncontract of Rs.1,77,53,387/-. Hence, the nature ofVAT dues amounting to Rs.21,77,996/- standsunexplained and is to be brought to tax. 8.The petitioner could submit the document inrespect of the mismatch in sundry creditors only for anamount of Rs.72,73,801/-. After considering the reply, the W.P.(C) NO.31020 OF 2022 assessing authority was of the opinion that, on the basis ofthe material/information available on record, the assessingauthority had a reason to believe that the incomechargeable to tax had escaped the assessment in theassessment year 2015-2016 and it was a fit case forissuing notice under Section 148 of the Act. Accordingly,notice under Section 148 of the Act has been issued. 9.The learned counsel for the petitioner submitsthat the impugned order dated 31.08.2022 passed underClause d of Section 148A is based on the change ofopinion. It is further submitted that these facts werepresented before the assessing authority and theassessing authority having been satisfied with theexplanation offered by the petitioner, computed theincome of the petitioner and passed the assessment orderin Ext.P1 order dated 24.12.2018. The learned counsel forthe petitioner further submits that the issue regarding there-opening of the assessment order is based solely on amere change of opinion is no longer res integra andtherefore, the impugned order is liable to be set aside. W.P.(C) NO.31020 OF 2022 9.The learned counsel for the petitioner submitsthat the impugned order dated 31.08.2022 passed underClause d of Section 148A is based on the change ofopinion. It is further submitted that these facts werepresented before the assessing authority and theassessing authority having been satisfied with theexplanation offered by the petitioner, computed theincome of the petitioner and passed the assessment orderin Ext.P1 order dated 24.12.2018. The learned counsel forthe petitioner further submits that the issue regarding there-opening of the assessment order is based solely on amere change of opinion is no longer res integra andtherefore, the impugned order is liable to be set aside. W.P.(C) NO.31020 OF 2022 10.On the other side, Sri. Jose Joseph, learnedSenior Standing Counsel submits that the sundry creditorsis petitioner's sister concern and when the books ofaccounts of the sister concern were looked into, it wasfound that, except for 72,00,000/-, no other credit was dueof the said sister concern against the petitioner. When thepetitioner's assessment order was finalised, the books ofaccounts of the sister concern were produced before theassessing authority. It is further submitted that once theorder has been passed after considering theobjection/reply of the assessee under Section 148A(d) ofthe Act, the challenge to the said order cannot be madebefore this Court in exercise of its jurisdiction underArticle 226 of the Constitution of India. The petitionershould participate in the assessment proceedings by filingthe return of notice under Section 148 of the Act. 11.Sri. Jose Joseph, learned Standing Counselplaced reliance on the judgment of Punjab and HaryanaHigh Court in Anshul Jain v. Principal Commissionerof Income Tax and Another [(2022) 449 ITR 251 W.P.(C) NO.31020 OF 2022 (P&H)], in which challenge to the order passed underSection 148A(d) was repelled on the ground that HighCourt should not interfere at the stage where theproceedings have not yet been concluded by the statutoryauthorities. It was further held that, if the authority hasjurisdiction and the order passed is not beyond thejurisdiction, the correctness of the order under Section148A(d) cannot be challenged on the factual premise.There is a well settled distinction between thejurisdictional error and the error of law and facts withinthe jurisdiction. For rectification of the error, and the lawand facts, statutory remedy has been provided however,the writ is not a proper remedy in respect of an error oflaw and fact, if there is such a remedy provided under thestatute. The said judgment has been affirmed by theSupreme Court in Anshul Jain case (supra).12.Considering the aforesaid aspect of the matterthat the order under Section 148A(d) had been passedafter considering the reply submitted by the petitioner andtaking into consideration the fact and circumstances of the W.P.(C) NO.31020 OF 2022 case, the assessing authority formed an opinion that theincome chargeable to tax has escaped assessment in theassessment year 2015-2016. At this stage, this Courtwould not like to interrupt the proceedings, and thepetitioner should file reply the return of income inresponse to the notice issued under Section 148 of theAct. If the assessment order is finalised, the petitionerwould have a remedy to file an appeal under theprovisions of the Income Tax Act, but at this stage, I am ofthe view that the order under Section 148A(d) is notmerely based on the change of opinion in the facts andcircumstances stated above. Thus, the writ petition is dismissed, however, thepetitioner is granted 30 days' time to file reply/return tothe notice under Section 148 and thereafter, the assessingauthority shall proceed to finalise the assessment inaccordance with law. bpr Sd/- DINESH KUMAR SINGHJUDGE W.P.(C) NO.31020 OF 2022 -11- Thus, the writ petition is dismissed, however, thepetitioner is granted 30 days' time to file reply/return tothe notice under Section 148 and thereafter, the assessingauthority shall proceed to finalise the assessment inaccordance with law. bpr Sd/- DINESH KUMAR SINGHJUDGE W.P.(C) NO.31020 OF 2022 -11- APPENDIX OF WP(C) 31020/2022 PETITIONER'S EXHIBITS Exhibit P1 TRUE COPY OF THE ORDER OF ASSESSMENT DATED 24.12.2018 WITH TYPED LEGIBLE COPY OF ORDER WITHOUT COMPUTATION STATEMENT AND NOTICE OF DEMANDDATED 24.12.2018 WITH TYPED LEGIBLE COPY OF ORDER WITHOUT COMPUTATION STATEMENT AND NOTICE OF DEMAND Exhibit P2A TRUE COPY OF THE ORDER OF ASSESSMENT DATED 28.12.2018 COMPLETED U/S. 143 (3)R.W.S. 147 OF THE ACTDATED 28.12.2018 COMPLETED U/S. 143 (3)R.W.S. 147 OF THE ACT Exhibit P3TRUE COPY OF THE NOTICE DATED 22.06.2021 ISSUED U/S. 148 OF THE ACT22.06.2021 ISSUED U/S. 148 OF THE ACT Exhibit P4A TRUE COPY OF THE SAID INTERIM ORDER DATED 20.12.2021 IN W.P.C NO. 29422 OF 2021DATED 20.12.2021 IN W.P.C NO. 29422 OF 2021 Exhibit P5A TRUE COPY OF THE SAID NOTICE DATED 23.05.2022 ISSUED UNDER SECTION 148 A(B) OF THE ACT23.05.2022 ISSUED UNDER SECTION 148 A(B) OF THE ACT Exhibit P6TRUE COPY OF THE REPLIES FILED BY THE PETITIONER DATED 01.06.2022PETITIONER DATED 01.06.2022 Exhibit P6(a)TRUE COPY OF THE REPLIES FILED BY THE PETITIONER DATED 16.07.2022PETITIONER DATED 16.07.2022 Exhibit P7A TRUE COPY OF THE PROCEEDINGS DATED 31.08.2022 COMPLETED U/S 148 A (D) OF THE ACT31.08.2022 COMPLETED U/S 148 A (D) OF THE ACT Exhibit P8A TRUE COPY OF THE NOTICE U/S. 148 OF THE ACT DATED 31.08.2022THE ACT DATED 31.08.2022