Wtax/720/2023 Of Arb Hotels Resorts Private Limited v. Principal Chief Commissioner Of Income Tax And 2 Others

Court No. - 42 Case :- WRIT TAX No. - 720 of 2023 Petitioner :- Arb Hotels Resorts Private Limited Respondent :- Principal Chief Commissioner Of Income Tax And 2 OthersCounsel for Petitioner :- Ashish BansalCounsel for Respondent :- Gaurav Mahajan Hon'ble Saumitra Dayal Singh,J.Hon'ble Chandra Kumar Rai,J. 1. Heard Sri Ashish Bansal learned counsel for the petitioner and Sri ManuGhildayal learned counsel for the revenue. 2. Present writ petition has been filed by the assessee to question thereassessment proceedings initiated in its case under Section 148 of the IncomeTax Act, 1961 (hereinafter referred to as 'the Act') pursuant to the earlier orderpassed under Section 148A(d) of the Act, dated 31.7.2022 and the consequentnotice issued on that date. 3. Submission of learned counsel for the petitioner is, the very initiation of thereassessment proceedings was bad. The Assessment Year in question is 2013-2014. Three years from the end of that Assessment Year expired on 31.3.2017.By virtue of mandatory provisions of Section 149 of the Act read with relevantCircular of the CBDT, no reassessment proceedings may have been initiatedagainst the petitioner after 31.3.2017 if the component of income alleged to haveescaped assessment was less than 50 Lakhs. 4. In the present case, relying on the view now expressed by the assessingauthority contained in its final show cause notice dated 12.5.2023, it has beenvehemently urged, the objection raised by the petitioner at the initial stage thatthere was no second transaction of Rs. 27 lakhs and that there was only onetransaction of Rs.27 lakhs alleged to have escaped assessment has been foundtrue. The reassessment proceedings may not have been initiated at all since thequantum of escapement was only Rs. 27 lakhs i.e. well below the statutory limitof Rs. 50 lakhs. 5. To bolster his submission, learned counsel for the petitioner has referred to theoriginal notice issued under Section 148A(b), dated 25.5.2022; reply furnishedby the assessee thereto dated 11.6.2022 and; the order passed by the assessingauthority under Section 148(b), dated 31.7.2022. Thus, it has been elaborated, atthe stage of assuming jurisdiction, the assessing authority wrongly brushed asidethe specific objection of the petitioner as to absence of second transaction of Rs.27 lakhs. The recital in that order that accommodation entry had been providedto the petitioner in an unaccounted bank account from another unaccounted bankaccount of M/s Jar Metal Industries Pvt. Ltd. was nothing but a figment ofimagination. 6. Thus, it has been submitted, reassessment proceedings have been initiatedagainst the petitioner on non existent material. If the non existent transaction ofRs. 27 lakhs is ignored, then by virtue of the mandatory language of Section149, no reassessment proceedings could ever have been initiated. It has beenfurther submitted, reassessment order has been passed in the present case on25.5.2023. 6. Thus, it has been submitted, reassessment proceedings have been initiatedagainst the petitioner on non existent material. If the non existent transaction ofRs. 27 lakhs is ignored, then by virtue of the mandatory language of Section149, no reassessment proceedings could ever have been initiated. It has beenfurther submitted, reassessment order has been passed in the present case on25.5.2023. 7. On the other hand, learned counsel for the revenue would submit, there is nomaterial to reach any conclusion at this preliminary stage that the informationpertaining to the second transaction of Rs. 27 lakhs was non-existent. The factthat such information has not been found credible enough to include that amountin the component of escapement of income may not prejudice the initiation ofreassessment proceedings. At the stage of initiation of the proceedings, only asatisfaction was required to be drawn on the strength of information thenavailable. At that stage, in the present facts, the assessing authority felt satisfiedthat there were two accommodation entries of 27 lakhs each, obtained by theassessee from M/s Jar Metal Industries. However, it may be true, during thecourse of reassessment proceedings and upon consideration of the repliesfurnished by the assessee, the assessing authority is now proposing to take adifferent view by ignoring one alleged accommodation entry of Rs. 27 lakhs.That course is stated to be wholly permissible in law and in the interest ofassessee itself. 8. Then, it has been submitted, at present, there is no material to reach anyconclusion that the other accommodation entry of Rs. 27 lakhs relied against thepetitioner was either non-existent or that explanation furnished by the assessee iswholly acceptable. On the strength of this submission, it has been asserted theCourt may not interfere in exercise of its discretionary equitable jurisdictionunder Article 226 of the Constitution of India as prima facie, information andsatisfaction (arising therefrom), ofescapement of income exists with respect tothat amount. 9. Having heard learned counsel for parties and having perused the record, in thefirst place, under the amended law, the assessing authority draws power toreassess the assessee, from Section 147 of the Act, if any income chargeable totax in the case of that assessee escapes assessment. That power has been madesubject to provisions of Section 148 to 153 of the Act. By virtue of Section 148of the amended law, reassessment notice may be issued under that provisionsubject to compliance of Section 148A of the Act, whereafter he may serve thejurisdictional notice. 10. Section 148A is a new provision. Earlier, under the unamended law, byvirtue of decision of the Supreme Court in GKN Driveshafts (India) Ltd Vs.Income Tax Officer, 259 ITR 19 (SC), it had been made obligatory on part ofthe assessing authority to consider the objections to jurisdictional notices issuedunder Section 148, before proceeding with the reassessment proceedings. Whilethat was the scheme under the unamended law, upon amendments made by theFinance Act, 1921, new provision Section 148A has been introduced. That notonly gives statutory right to the assessee to object to proceeding under Section148 rather, it prescribes the manner in which such objection may be invited anddealt with. 11. Thus, before issuing a reassessment notice, on any information that mayhave been received by the assessing authority, presently, the assessing authorityhas been obligated to first conduct an enquiry with respect to information thatmay suggest to him that any income chargeable to tax had escaped assessment.This is provided under Section 148A(a) of the Act. Then, by virtue of sub clause 11. Thus, before issuing a reassessment notice, on any information that mayhave been received by the assessing authority, presently, the assessing authorityhas been obligated to first conduct an enquiry with respect to information thatmay suggest to him that any income chargeable to tax had escaped assessment.This is provided under Section 148A(a) of the Act. Then, by virtue of sub clause (b) of Section 148A, the assessing authority has to give to the assessee anopportunity of being heard by serving on him a prior notice, to show cause whyproceedings under Section 148 may not be initiated in his case. Upon statementand reply filed by the assessee under Section 148A(c), the assessing authority isthen obligated to decide, on the basis of material available on record (that maynecessarily include the reply furnished by the assessee), whether it is a 'fit case',to issue notice under Section 148. That decision is to be in the shape of an orderto be passed with prior approval of specified authority, where required. 12. Examined in that light, it is seen, procedurally the assessing authority hadfollowed the amended law inasmuch as he first issued the notice dated 25.5.2022inviting objections from the petitioner on the information received by him. Thepetitioner did file objections thereto on 11.6.2022. There upon an order waspassed by the assessing authority on 31.7.2022. At that stage, the assessingauthority recorded its satisfaction thus:- "6.4 From audited financial statement of JAR Metal Industries Pvt. Ltd., Rs.27,00,000/-mentioned in annexure A on account of investment as at 31st March, 2013 and same amountmentioned in the statement of bank account and audit report of the assessee. The anotherentry of Rs. 27,00,000/- has not mentioned in the aforesaid accounts. As per information,during the course of search, Shri Pradeep Kumar Jindal had confirmed the two entry of Rs.27,00,000/- dated 10.04.2012 and Rs. 27,00,000/- dated 04.10.2012 were provided to theassessee company through JAR Metal Industries Pvt. Ltd. It is appear that the another receiptamount of Rs.27,00,000/- dated 10.04.2012 was received in unaccounted bank account andM/S JAR Metal Industries Pvt. Ltd also transfer this amount from unaccounted bank account.Therefore, in this regard, necessary verification is to be need and it should be investigatedduring the course of assessment proceedings u/s 147 of the Act. 6.5 Bank statement of JAR Metal Industries Pvt. Ltd has not enclosed with this information asthe various numbers of entities involved in this matter and it is not possible to each & everyentity's bank statement enclosed with the information. 6.6 As per information, value of the total accommodation entries were Rs 54,00,000/ and theescaped amount is above Rs. 50,00,000/-. As per as per Instruction No. 01/2022 dated11.05.2022 of CBDT, this case is not time barred. 6.7 As per material which provided to the assessee, two entry of Rs. 27,00,000/- dated10.04.2012 and Rs. 27,00,000/- dated 04.10.2012 are mentioned in its and assessee companyhas confirmed this in its reply. In this regard, without complete inquiry form the concernedparties, it cannot be accepted that only Rs. 27,00,000/- was credited in the bank account ofthe assessee company." 13. Thereafter, the reassessment notice dated 31.7.2022 appears to have beenissued to the assessee. The assessee filed further replies and the proceedingshave been conducted and now concluded after almost one year. At this stage, on12.5.2023 the final show cause notice appears to have been issued to the assessee, to submit any other reply that it may seek to submit. At this stage,perusal of that notice, does appear to indicate that the assessing authority hasreconsidered his tentative view expressed in the order passed under Section148A(b), dated 31.7.2022 and he is now proposing to confine the proceedingsto one accommodation entry of Rs. 27 lakhs only. 13. Thereafter, the reassessment notice dated 31.7.2022 appears to have beenissued to the assessee. The assessee filed further replies and the proceedingshave been conducted and now concluded after almost one year. At this stage, on12.5.2023 the final show cause notice appears to have been issued to the assessee, to submit any other reply that it may seek to submit. At this stage,perusal of that notice, does appear to indicate that the assessing authority hasreconsidered his tentative view expressed in the order passed under Section148A(b), dated 31.7.2022 and he is now proposing to confine the proceedingsto one accommodation entry of Rs. 27 lakhs only. 14. While that fact submission is attractive at the surface, yet the writ Court maynot be compelled to interfere at this stage of the proceedings, especially in viewof the facts noted above. 15. By way of reason, neither under the unamended law nor under the amendedlaw, it was ever obligatory on the assessing authority to proceed to makeassessment of component of escaped income with respect to entire'information/reason to believe' that may have given rise to reassessmentproceedings. That satisfaction/reason to believe has always been relevant onlyfor the purpose of assumption of jurisdiction. Once jurisdiction was validlyassumed by recording appropriate 'reason to believe', issuance of the noticethereafter, threw open entire assessment of the subject assessee. It enabled theassessing authority to pass a reassessment order both with respect to informationthat may have given rise to 'reason to believe', as also on other issues that mayarise during the course of reassessment proceedings. 16. Similarly, the assessing authority was not bound in law to bring to tax allincome commensurate to the information/'reason to believe', recorded by him, toassume jurisdiction. It was always open in law (for the assessing authority), todrop whole or any part of such allegations of escapement of income (drawn atthe initial stage). 17. Even under the amended law, no change has been brought as may compelthe assessing authority to subject an assessee to tax on entire information givingrise to reassessment proceedings. In short, even after the amendment made to theAct, the issue as to assumption of jurisdiction and passing of assessment order inexercise of that order remain two separate and largely independent exercise.While no reassessment order may be passed unless jurisdiction is shown to havebeen validly assumed, reassessment order giving rise to tax liability is not sine 18. The fact that in the present case, the assessing authority has reconsidered hisposition and now reached a conclusion that there exists only oneaccommodation entry of Rs. 27 lakhs and not two such entries, may only impactthe quantum of reassessment order to be made. 19. Insofar as at the stage of assumption of jurisdiction, the assessing authorityhad taken note of two entries that too after issuing due notice to the petitionerand passing an order under Section 148A(d), establishes due compliance of theprocedure. The fact that such tentative conclusion recorded at that stage may notbe found to be correct in entirety, and the fact only one accommodation entry ofRs. 27 lakhs may have been obtained by the assessee, may not be enough to nowlead to the conclusion that learned counsel for the petitioner has tried topersuade us to. There is no material or basis to conclude that there never existedany material or information as to allegation of the second accommodation entryof Rs. 27 lakhs, in an undisclosed bank account. In any case, it is too late in theday to enter into that exercise. 20. The effect of section 149 has to be seen in the context of facts that obtainedat the stage of initiation of reassessment proceedings. Insofar as at that stage thequantum of income alleged to have escaped assessment was quantified at Rs. 54lakhs, allowed the assessing authority of the petitioner to take benefit of Section149(b) of the Act, at that stage. Almost one year has passed since then, beforepresent challenge has arisen. At present, even the reassessment order has comeinto existence. There is no reason available to this Court to infer, there is noescapement of income of Rs. 27 lakhs (arising from the other accommodationentry). 21. Subsequent development emerging in the course of reassessmentproceedings wherein a fact conclusion may be drawn by the assessing authorityindicating escapement of income below 50 lakhs cannot relate back to have anymaterial bearing on the initiation of the reassessment proceedings and it cannotundo that initiation of proceeding. There is no principle of law (statutory orotherwise) to reach that conclusion. Plainly, in the facts as noted above, no sanction was required to be obtained at the stage of initiation of reassessmentproceedings. Therefore, initiation of reassessment proceeding was well foundedon satisfaction as to escapement of income, from tax. The fact that some part ofthe allegation of escapement is being dropped or not pursued at the stage ofquantification of income, may not nullify the assumption of jurisdiction, by nowinvoking section 149 of the Act. 22. Last, we may also note as a Court of equity, the writ Court may not bepersuaded to drop the entire proceedings at the fag end on a purely technicalsubmission. Yet, that submission is not being accepted in the present facts. On ageneral principle, once component of escapement exists, it has to be finallydetermined by the assessing authority. We therefore refrain ourselves fromexercising the discretionary jurisdiction to quash the entire proceedings at thislate stage. To that rule of equity and good conscience, we abide. 23. Accordingly, we refuse to exercise jurisdiction under Article 226 of theConstitution of India. Writ petition is dismissed. Any observation made in thisorder may not prejudice the assessee in outcome of the reassessmentproceedings (on merit issues). Those may be determined on own facts andsubmissions to be considered by the assessing authority and or the appealauthority. Order Date :- 26.5.2023Faraz (C.K. Rai, J.) (S.D. Singh, J.)