[Cites 7, Cited by 0]
Calcutta High Court
Rga Software Systems Pvt Ltd vs Union Of India And Ors on 5 January, 2026
ORDER SHEET OD-1
IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
ORIGINAL SIDE
WPO/732/2025
RGA SOFTWARE SYSTEMS PVT LTD
VS
UNION OF INDIA AND ORS.
BEFORE:
The Hon'ble JUSTICE OM NARAYAN RAI
Date: 5th January, 2026.
Appearance:
Mr. J. P Khaitan, Sr. Adv.
Mr. Pratyush Jhunjhunwala, Adv.
Ms. Sruti Datta, Adv.
Ms. Sakshi Singli, Adv.
...For the Petitioner
Mr. Prithu Dudhoria, Adv.
Mr. Madhu Jana, Adv.
...For Respondents Income Tax Department
The Court: - This writ petition mounts challenge to a notice dated June 26,
2025 issued under Section 148 of the Income Tax Act, 1961 marking initiation of
proceedings for reassessment of the petitioner's income for the assessment year
2021-22.
Mr. Khaitan, learned Senior Advocate appearing for the petitioner submits
that the notice impugned has been issued without proper application of mind
and upon deciding jurisdictional facts wrongly.
It is submitted that the annexure to the impugned notice under Section
148 of the said Act of 1961 would reveal that the basis of reassessment of
petitioner's income for the said assessment year is that the assessee "had failed
to disclose an amount of Rs. 264,56,47,555/-, towards "Interest from Income Tax
Refund" and "Rent Received" during the F.Y. 2020 to 2021 in its books of accounts
and hence, evaded taxes accordingly". It is submitted that the petitioner is
engaged in the business of infrastructure development for being used by IT and
ITES Companies. It is further submitted that the petitioner has also developed
Special Economic Zone (SEZ) for being used by such entities as specified and
notified by the Government of India under the SEZ Scheme and that after
development of such infrastructure, the petitioner has been operating and
maintaining such infrastructure and has been receiving all revenues upon
renting the same.
He has taken this Court through the scrutiny assessment orders, the
computation sheets for various assessment years and the Income Tax Return
filed by the petitioner for the assessment year 2021-22 and sought to
demonstrate that the petitioner has all along been offering the income generated
from its business of development of infrastructure and maintenance and leasing
thereof for the purpose of SEZ and IT Parks to tax under the head "income from
business and profession" and the petitioner has all along been assessed on the
basis of the aforesaid material. Mr. Khaitan has also placed snippets from the
Audited Financial Statements to indicate that the petitioner's revenue from
operations is veritably attributable to income from the SEZ and IT Parks which
has been duly accounted for in the books of accounts. Mr. Khaitan submits that
in such view of the matter, there could be no reason for the revenue authorities
to allege that the petitioner had failed to disclose any amount in its books of
accounts.
It is submitted that prior to the issuance of the said notice under Section
148 of the said Act of 1961, a notice under Section 133(6) of the said Act of 1961
had been issued to the petitioner, thereby calling upon the petitioner to provide
information as regards interest from income tax refund and rent received. By the
said notice the petitioner was also asked to explain the reasons for offering rent
from house property under any other head of income than under the head,
"income from house property", in case the petitioner had done so.
Mr. Khaitan took this Court to the petitioner's reply to the said notice
under Section 133(6) of the Said Act of 1961 and demonstrated that the
petitioner being engaged in the business of development of infrastructure facility
and leasing and maintaining the same for SEZ was eligible to claim deduction
under Section 80IAB of the said Act of 1961 and as such the petitioner has
rightly offered the income received from such property under the head "profits
and gains from business or profession" and not under "income from house
property".
It is further submitted that the response furnished by the petitioner to the
notice under Section 133(6) of the Said Act of 1961 has not been considered and
appreciated at all by the respondent revenue authorities. It is then submitted
that even after issuance of the notice under Section 148 of the said Act of 1961,
the petitioner raised an objection thereto once again explaining therein as to why
the rental income derived by the petitioner during the relevant year was shown
under the head "profits and gains from business or profession" and not under the
head "income from house property". Such objection of the petitioner's has not
been disposed of and the respondents/Revenue Authorities have initiated the
reassessment proceedings upon issuance of the impugned notice under Section
148 of said Act of 1961.
In support of his contention that non application of mind to the
information as well as explanation furnished by an assessee in response to a
notice under Section 133(6) of the said Act of 1961 prior to issuance of notice
under Section 148 of the said Act of 1961 would render such notice arbitrary,
Mr. Khaitan has relied on a judgment of Hon'ble High Court in Bombay in the
case of Benaifer Vispi Patel Vs. Income Tax Officer and Another reported at
[2025] 475 ITR 704 (Bom).
A judgment of the Hon'ble Allahabad High Court in the case of Arjun Sahu
Vs. Assistant Commissioner of Income Tax reported at [2025] 179
taxmann.com 581 (Allahabad) has been relied on to assert that even in cases
which fall under Section 148A (4) of the said Act of 1961, the principles
enunciated by the Hon'ble Supreme Court in the case of GKN Driveshafts
(India) Ltd. Vs. Income Tax Officer and Others reported at 2003 259 ITR 19
have been imported and applied.
Another judgment of the Hon'ble High Court of Punjab and Haryana in the
case of Vishal Garg Vs. Assistant Commissioner of Income Tax reported at
[2024] 167 taxmann.com 483 (Punjab & Haryana) has been relied on to
contend that reply furnished by an assessee to notice under Section 133(6) of the
said Act 1961 must be considered and issuance of notice ignoring such reply
would render the notice vulnerable.
A judgment of the Hon'ble High Court of Delhi in the case of Monish
Gajapati Raju Pusapati Vs. Assessment Unit Income Tax Department
reported at [2025] 171 taxmann.com 874 (Delhi) has been relied on to
demonstrate that the revenue authorities have in the said case considered the
assessee's objection to the notice under Section 148 of the said Act of 1961 and
disposed of the same prior to proceeding further. It is submitted that there was
no reason for the respondents/ Revenue Authorities to take a divergent course in
the case at hand.
Mr. Dudhoria, Learned Advocate appearing for the respondents/Revenue
Authorities seeks time to file affidavit in opposition to the writ petition.
Heard the Learned Advocates appearing of the respective parties and
considered the materials on record.
From the material on record, it is evident that the petitioner's objection to
the notice issued under section 148 of the said Act of 1961 has not been dealt
with as yet.
The petitioner's explanation for not offering its income to tax under the
head "income from house property" and for offering it under the head "profits and
gains from business or profession" instead, as provided in response to the notice
under section 133(6) of the said Act of 1961 demonstrably finds support from the
scrutiny assessment orders and the computation sheets for various assessment
years as well as the Income Tax Return for the assessment year 2021-22 that
form part of the writ petition. The petitioner's stand, at the first glance, also
stands corroborated by the petitioner's Audited Financial Statements as on
March 31, 2021 which record that the petitioner's revenue from operations are
clearly ascribable to income from SEZ and IT Parks. The petitioner's reply to the
notice under section 133(6) of the said Act of 1961 read cumulatively with the
said scrutiny assessment orders and the computation sheets for various
assessment years, the Income Tax Return for the assessment year 2021-22 as
well as the Audited Financial Statements as on March 31, 2021 give the prima
facie impression that there is no failure of disclosure of any amount in the
petitioner's books of accounts as alleged which forms the basis of issuance of the
notice under Section 148 of the said Act of 1961. In such view of the matter,
there is good reason to reach a prima facie conclusion that the relevant revenue
authority has failed to apply its mind to the explanation given by the petitioner
for offering its income to tax under the head "profits and gains from business or
profession" and not under the head "income from house property".
Having regard to the consistent view taken by various High Courts, this
Court is also of the prima facie view that non application of mind to the material
already on record as well as the explanation and information furnished by the
assessee either by way of a response to a notice under section 133(6) of the said
Act of 1961 or otherwise before issuance of notice under section 148 of the said
Act of 1961 would render such notice susceptible to challenge.
This Court is also in prima facie agreement with the view of the Hon'ble
High Court at Allahabad in the case of Arjun Sahu (supra) that the principle
enunciated by the Hon'ble Supreme Court in the case of GKN Driveshafts
(India) Ltd. Vs. Income Tax Officer and Others (supra) would be importable
and applicable to cases that fall under Section 148A (4) of the said Act of 1961
and that being so objection filed to a notice under Section 148 of the said Act of
1961 should in the prima facie view of this Court be disposed of even if the
procedure applicable under Section 148A of the said Act of 1961 is not
applicable.
The Court would, however, be able to take the final decision in the matter
on all the aforesaid points only after the stand of the revenue comes before Court.
However, since a strong prima facie case has been made out by the
petitioner meriting grant of interim order, there shall be an interim order in terms
of prayer (f) of the writ petition. Accordingly, it is directed that the
respondents/Revenue authorities shall stand restrained from proceeding further
on the strength of the impugned notice dated 26 th June, 2025 issued under
Section 148 of the said Act of 1961 for the assessment year 2021-22 till the end
of March 20, 2026 or until further orders, whichever is earlier.
As prayed for by Mr. Dudhoria, the respondents/Revenue Authorities shall
have liberty to file affidavit in opposition to the writ petition within four weeks
from date. Affidavit-in-reply, thereto, if any, be filed within two weeks thereafter.
List this matter for hearing immediately after expiry of the time fixed for
exchange of affidavits.
(OM NARAYAN RAI, J.)
JM/DB
