Devleela Developers vs Assistant Commissioner Of Income ...
2023 Latest Caselaw 6516 Bom

2023:BHC-OS:6431                                        1/6                             411-wpl-16021-23.doc




                            IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                               ORDINARY ORIGINAL CIVIL JURISDICTION
                                 WRIT PETITION (L) NO.16021 OF 2023

           Devleela Developers                                 ....Petitioner
                  V/s.
           Assistant Commissioner of
           Income Tax Circle 42(1)(1) & Ors                    ...Respondents

                                             ----

Mr. Gunjan Kakad a/w Mr. Rajesh Poojary i/b Mint & Confreres for Petitioner.

Ms Sushma Nagraj a/w Ms Kinjal Patel for Respondents.

----

CORAM : K.R. SHRIRAM & FIRDOSH. P. POONIWALLA, JJ DATED : 10th JULY 2023

P.C. :

1 This petition is impugning a notice dated 31 st March 2023, order

dated 18th April 2023 and re-assessment notice also dated 18th April 2023,

pertaining to A.Y.-2016-2017 on various grounds. Though, Ms Nagraj, asked

for sometime to file the reply, in our view, it would serve no purpose in

granting any time.

2 Notice dated 31st March 2023 for A.Y.-2016-2017 issued under Section

148A of the Income Tax Act 1961 (the Act), says "the details of the

information / enquiry conducted on which reliance is being placed,

alongwith supporting documents, are enclosed with this notice." Annexure

to the said notice reads as under:

"Please find attached herewith information received in your case for AY 2016-17 on insight portal. This information suggests that income chargeable to tax has escaped assessment for the year under consideration.

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3. As per explanation 1(i) of section 148, any information received in accordance with Risk Management Strategy formulated by the Board constitutes information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment for the purposes of Section 148 and Section 148A.

4. In view of the above, you are hereby asked to show cause, in accordance with section 148A(b), as to why a notice under section 148 should not be issued. You are hereby asked to furnish your explanation alongwith supporting documents/evidences by the aforementioned date."

The information attached to the annexure in the dissemination note

reads as under:

"CHETAN D THAKKAR is maintaining a savings account number 001801539847 with branch Borivali, Maharashtra since 06-01-2011. Date of birth of the customer is 19-05-55. PAN is AAAPT7713R. Account no. 001805012072 linked by transactions. Alert triggered in the account for large value non cash transactions in savings account. As per EDD, customer is in business of construction. Total credits between 14-07-2014 to 10-07-2015 were Rs.12.17 crore out of which Rs.9.29 crore was transfer, Rs.2.62 crore was clearing, Rs.15.08 lac was RTGS, Rs.5 lac was NEFT, Rs.4 lac was cash deposit and total debits between the same period were Rs.12.09 crore out of which Rs.11.61 crore was transfer, Rs.25.94 lac was clearing, Rs.5.50 lac was rejection, Rs.4.81 lac was RTGS, Rs.3.91 lac was internet fund transfer to third party. Rs.3.06 lac was NEFT, Rs.3 lac was cash withdrawal, Rs.1.16 lac was remittance. RTGS was from Kings Empire Enterprises, RTGS/NEFT was towards Sheela Tours N Travels, remittance towards other travel (international credit cards) On 16-04- 2015 Rs.15.08 lac credited by RTGS from Kings Empire Enterprises & same day debited by transfer to Devleela Developers. In view of usage of account for parking of funds it is reported in STR."

3 We tried to make sense of this dissemination note but we could not.

We are unable to make out as to what did the officer really want from

assessee. Even, Ms Nagraj struggled to explain what the officer wanted

assessee to show cause. Ms Nagraj made an attempt to explain but we found

that those were only from the order dated 18th April 2023.

4 It is settled law that issuance of a show cause notice is not an empty

formality. Its purpose is to give a reasonable opportunity to the affected

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persons to contend that the information on which the officer has assumed

that income chargeable to tax has escaped assessment, is not correct. A

Division Bench of this court in Jugal Kishore Jajodia Vs. S. C. Prasad, Chief

Engineer1 has held that the appropriate authority should give to the person

likely to be affected by the order proposed to be made a notice of the action

intended to be taken, inform him about the materials on the basis of which

the appropriate authority proposes to take action and give a fair and

reasonable opportunity to such person to represent his case and to correct

or controvert the material sought to be relied upon against him. If a vague

show cause notice is given without specifying anything as has been done in

this case or without specifying the grounds for holding that income liable to

tax has escaped assessment, it can be held that reasonable opportunity of

showing cause has not been given. Paragraph 8 of the said judgment reads

as under:

8. It is settled law that issuance of a show-cause notice is not an empty formality. Its purpose is to give a reasonable opportunity to the afected persons to contend that the apparent consideration as per the agreement to sell is the market price or that there is no undervaluation because of peculiar facts. The appropriate authority should give to the person likely to be afected by the order proposed to be made a notice of the action intended to be taken, inform him about the materials on the basis of which the appropriate authority proposes to take action for pre- emptive purchase and give a fair and reasonable opportunity to such person to represent his case and to correct or controvert the material sought to be relied upon against him. Hence, in the show-cause notice under Section 269UD of the Act, provisional conclusions are required to be briefy specifed. These provisional conclusions are required to be briefy specifed so that the afected persons could correct or controvert the same effectively. If a vague show- cause notice is given without specifying anything as has been done in this case or without specifying the grounds for holding that the property is required to be purchased under Section 269UD of the Act, then it can be held that reasonable opportunity of showing

1. (2022) 135 taxmann.com 329 (Bombay)

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cause has not been given. The transferor and transferee would be totally unaware of the grounds which had prompted the appropriate authority to arrive at prime facie conclusion that the power under Section 269UD(1) of the Act was required to be exercised and the property should be compulsorily purchased. The Division Bench of Gujarat High Court in Om Shri Jigar Association vs. The Union of India and others 1 at paragraphs 7,8 and 9 held as under :-

"7. In our view, considering the findings given above, it is not necessary to deal with the aforesaid contention exhaustively. However, it should be noted that issuance of a show-cause notice is not an empty formality. Its purpose is to given a reasonable opportunity to the affected persons to contend that the apparent consideration as per the agreement to sell is the market price or that there is no undervaluation because of peculiar facts. Therefore, before taking any action under section 269UD(1) of the Income-tax Act, the appropriate authority should give to the person likely to be affected by the order proposed to be made a notice of the action intended to be taken, inform him about the material on the basis of which the appropriate authority proposes to take action for pre-emptive purchase and give a fair and reasonable opportunity to such persons to represent his case and to correct or controvert the material sought to be relied upon against him. Hence, in the show-cause notice under section 269UD of the Income-tax Act, provisional conclusions are required to be briefly specified. If a vague show-cause notice is given without specifying anything or the grounds for holding that the property is required to be purchased under section 269UD of the Income-tax Act, then it can be held that reasonable opportunity of showing cause against an order for pre-emptive purchase being made by the appropriate authority was not given, because the transferor and the transferee would be totally unaware of the grounds which had prompted the appropriate authority to arrive at prime facie conclusion that the power under section 269UD(1) of the Income-tax Act was required to be exercised and the property should be compulsorily purchased. Issuance of a show-cause notice is the preliminary step which is required to be undertaken before giving opportunity of hearing under Section 269(UD)(1)of the Income-tax Act.

8. While considering the contents of show-cause notice in the matter arising in connection with a disciplinary proceeding under the Punjab Civil Services (Punishment and Appeal) Rules, 1952, the Supreme Court has in the case of B.D. Gupta v. State of Haryana, (1973) 3 SCC 149 : AIR 1972 SC 2472 observed as under (at page 2474) :

"There is nothing, however, in the 'Show-Cause Notice' of 26th October 1966 to indicate clearly that the dissatisfaction of Government with the appellant's reply of 18 December 1956 had nothing to do with Charge 1(a). The 'Show-Cause-Notice' merely states in vague general terms that the appellant's reply to the charges and allegations was unsatisfactory. Even if we were to assume, though there is no reasonable ground for this assumption, that Government did not have in mind the contents of Charge 1(a) while serving this 'Show-Cause-Notice', there is nothing in the 'Show- Cause-Notice' to give any indication that the particular allegations regarding which the

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appellant had failed to furnish a satisfactory explanation were referable only to Charge 1(b). The notice is vague on other grounds as well. As one reads the first paragraph of the notice, the questions that at once assail one's mind are many : In what way was the explanation of the appellant unsatisfactory ? Which part of the appellant's explanation was so unsatisfactory ? On what materials did the Government think that the appellant's explanation was unsatisfactory ? It is to our mind essential for a 'Show-Cause-Notice' to indicate the precise scope of the notice and also to indicate the points on which the officer concerned is expected to give a reply."

9. The same would be the position here. It would be difficult for the transferor and the transferee to show cause as to why the property should not be compulsorily purchased or to point out that there is no undervaluation of the property or even if there is undervaluation, it is because of the peculiar facts regarding the property."

5 We also find that the impugned order goes beyond what is mentioned

in the show cause notice. It is referring to multiple transactions between the

assessee and Chetan Thakkar, whereas, in the notice there is only one entry

on 16th April 2015 of Rs.15.08 lakhs mentioned.

6 In the circumstance, in our view, the notice dated 31 st March 2023,

order dated 18th April 2023 and the consequent notice dated 18 th April 2023

issued under Section 148 of the Act, have to be quashed and set aside,

which we hereby do.

7 At the same time, respondents may issue fresh notice to petitioner but

shall ensure, in the notice, that petitioner is given detailed information

about the materials on which the authority proposes to take action so that

petitioner will be able to effectively respond to the show cause notice.

8 Petition disposed. Time spent from 31 st March 2023, when the show

cause notice was issued until one week after the day this order is uploaded,

is excluded in computing time.

Meera Jadhav




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9         We clarify that we have not made any observations on the merits of

the matter.




(FIRDOSH P POONIWALLA, J.)                         (K.R. SHRIRAM, J.)




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