Delhi High Court
Seema Gupta vs Assistant Commissioner Of Income Tax on 20 March, 2024
Author: Yashwant Varma
Bench: Yashwant Varma, Purushaindra Kumar Kaurav
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 22 January, 2024
Judgment pronounced on: 20 March, 2024
+ W.P.(C) 8614/2016
SEEMA GUPTA ..... Petitioner
Through: Mr. Sumit Lalchandani and Mr.
Tarun Chanana, Advs.
versus
ASSISTANT COMMISSIONER OF
INCOME TAX ..... Respondent
Through: Mr. Shlok Chandra, Sr. SC with
Ms. Madhavi Shukla and Ms.
Priya Sarkar, Jr. SC along with
Mr. Ujjawal Jain, Adv.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR
KAURAV
JUDGMENT
YASHWANT VARMA, J.
1. This writ petition seeks quashing of proceedings for re-
assessment drawn pursuant to the powers conferred under Section 148
of the Income Tax Act, 19611 and assails the notice dated 31 March
2016 issued under Section 148 of the Act as also the order dated 25
July 2016 issued by the respondent. The writ petitioner also
additionally assails the notice dated 10 June 2016 issued under Section
143(2) of the Act and the notice dated 01 August 2016 issued under
Section 142(1) of the Act.
Act
2. The record would reflect that when the writ petition was
originally entertained, we had by an order dated 26 September 2016
restrained the Assessing Officer2 from completing the assessment
proceedings. It is that interim order which had continued on the writ
petition till date.
3. On 07 August 2023, the Court upon hearing preliminary
submissions of the parties had passed the following order:
"1. Mr Sumit Lalchandani, learned counsel for the petitioner,
informs us that this is a case where two sets of reasons have been
recorded.
2. In this behalf, Mr Lalchandani has drawn our attention to
Annexure P-7, which is appended on page 47 of the case file,
which, according to him, is the first set of reasons.
3. Insofar as second set of reasons are concerned, our attention is
drawn to Annexure R-6 which is appended to the affidavit filed
on behalf of the respondent/revenue pursuant to an order dated
05.01.2018 issued by the court. [See pdf page 125 of the case
file].
4. Mr Shlok Chandra, learned senior standing counsel, who
appears on behalf of respondent/revenue, says that he would like
to file written submissions in the matter. Leave in this behalf is
granted.
5. List the matter on 10.10.2023."
4. It appears that the principal contention of the petitioner was a
perceived distinction in the recordal of reasons for initiating
proceedings under Section 148 of the Act as appearing upon a reading
of a copy of which was supplied to the petitioner and the proforma for
recording reasons to initiate proceedings under Section 148 of the Act
which existed on the record of the respondent. It is this aspect which
was highlighted by Mr. Lalchandani, learned counsel appearing for the
writ petitioner during the course of his oral submissions.
AO
5. According to the writ petitioner, the reasons recorded for
selection of the petitioner‟s case for reassessment under Section 148 of
the Act and as provided to the petitioner, read as follows:
"PAN:AAIPG5271B
A.Y. 2009-10
An Information via e-mail was received from ADIT(lnv.) , Unit-
1(3), Ahmedabad vide letter no. AD IT(lnv)
1(3)/AHD/CCM/Dissemination /e-mail/l5-16 dated 17.03.2016 in
respect of Client Code Modification, dissemination of beneficiary
clients who have taken contrived losses and shifted out profits
during the F.Y. 2008-09 to 2011-12.
The Ahmedabad Investigation Directorate, as an institution
response to orchestrated misuse for client code modification for
tax evasion, carried out coordinated limited purpose surveys u/s
133A of the Income Tax Act, 1961 at the premise of 12 brokers
and few of their clients across India on 23.03.2015. After
considering the contention of brokers, it was concluded by the
ADIT that CCM has been used as a tool for tax evasion and only
settled trades have been considered to arrive at the beneficiaries.
As per information received in this case, it is seen that the
assessee during the F.Y. 2008-09 has profit shifted out of Rs.
20,29,332/- and losses shifted in of Rs. 3,98,825/- resulting in net
reduction in income of Rs. 16,30,506/ through Client Code
Modification.
In view of the above, approval of the Id. Principal Commissioner
of Income Tax, Delhi -14,New Delhi to issue notice u/s 148 of the
IT Act 1961, in this case is solicited."
6. Pursuant to our order dated 05 January 2018, the respondent also
brought on record the proforma maintained by it for the purposes of
recordal of reasons in order to initiate proceedings under Section 148 of
the Act. The said proforma is extracted hereunder:
"PERFORMA FOR RECORDING THE REASONS FOR INITIATING
PROCEEDINGS U/S 147/148 & FOR OBTAINING THE APPROVAL
OF THE PRINCIPAL COMMISSIONER OF INCOME TAX, DELHI-
14, NEW DELHI
1. Name and address of the Seema Gupta
assessee 9, East Avenue Road,
East Punjabi Bagh,
Delhi - 110023.
2. PNR/GIR No. AAIPG5271B
3. Status Individual
4. District/Ward/Range Circle-41(1), Delhi
5. Assessment Year in respect 2009-10
of which it is proposed to
issue notice u/s 148
6. The quantum of income 16,30,506/-
which has escaped
assessment
7. Whether the provisions of Section 147(b)
section 147(a) or 147(b) or
147(c) are applicable or both
sections are applicable
8. Whether the assessment is Yes
proposed to be made for the
first time, if the reply is in
the affirmative, please state:
a. Whether any voluntary Yes
return has already been filed
and
b. If so, the dates of filing the 29/09/2009
said return
9. If the answer to item 8 is in N.A.
the negative, please state
a. The Income originally N.A.
assessed
b. Whether it is a case of under N.A.
assessment at too low a rate,
assessment of which has
been made, the subject of
excessive relief or allowing
loss or depreciation;
10. Whether the provision of N.A.
Section 150(1) is applicable.
If the reply is in the
affirmative, the relevant
facts may be stated against
item no. 10 and it may also
be brought out that
provisions of section 150(2)
would not stand in the way
of initiating proceeding
under Section 147.
10. Reasons for the belief that Information via e-mail was
income has escaped received from ADIT (Inv.) ,
assessment. Unit-1(3), Ahmedabad vide
letter no. ADIT
(Inv)1(3)/AHD/CCM/Dissemin
ation/ email/ 15-16 dated
17.03.2016 in respect of Client
Code Modification,
dissemination of beneficiary
clients who have taken
contrived losses and shifted out
profits during the F.Y. 2008-09
to 2011-12.
The Ahmedabad Investigation
Directorate, as an institution
response to orchestrated misuse
for client code modification for
tax evasion, carried out
coordinated limited purpose
surveys u/s 133A of the
Income Tax Act, 1961 at the
premise of 12 brokers and few
of their clients across India on
23.03.2015. After considering
the contention of brokers, it
was concluded by the ADIT
that CCM has been used as a
tool for tax evasion and only
settled trades have been
considered to arrive at the
beneficiaries.
As per information received, it
is seen that the assessee during
the F.Y. 2008-09 has profit
shifted out of Rs. 20,29,332/-
and losses shifted in of Rs.
3,98,825/- resulting in net
reduction in income of Rs.
16,30,506/ through Client Code
Modification.
In view of the above precise information received from ADIT, I
have reasons to believe that income of assessee has escaped assessment.
Keeping in view of the above facts, it is requested that necessary
approval u/s 151(1) may kindly be accorded for initiating proceedings
u/s 148 of the Income Tax Act, 1961 in order to book income which
had escaped assessment.
Date: 23.03.2016
Assistant Commissioner of Income Tax
Circle-41(1), New Delhi
11. Whether the Pr. Commissioner of Yes, I‟m satisfied with
Income Tax is satisfied on the the reasons recorded.
reasons recorded by the A.O that
it is a fit case for the issue of
notice under section 148 of the
Income Tax Act, 1961
Pr. Commissioner of Income Tax
Delhi - 14, New Delhi"
7. Thereafter, and pursuant to the directions issued by us on 28 May
2018, an additional affidavit also came to be filed by the respondent
setting out details with respect to the dispatch of the proforma for
recording reasons for initiating proceedings under Section 148 of the
Act as also the steps taken and culminating in the issuance of the
Section 148 notice.
8. The difference and disparity between the information provided to
the petitioner and the reasons as existing on the record of the
respondent were sought to be highlighted by Mr. Lalchandani who
drew our attention to the following tabular statement:
"Information/ email Reasons recorded Reasons recorded filed
pursuant to which supplied to Petitioner by Respondent in
reasons were (Annexure P-7) at pursuant to the High
recorded (Annexure Page 47 of Case File Court order dated
R-2) at page 102 of 05.01.2018 (Annexure R-
the case file 6) at page 125 of Case
File.
3 The Ahmedabad An Information via e- Information via e-mail
Investigation mail was received was received from
Directorate, as an from ADIT(lnv.), ADIT(lnv.), Unit- 1(3),
institutional response Unit- 1(3), Ahmedabad vide letter
to the orchestrated Ahmedabad vide letter no. ADIT(lnv)
misuse for client code no. ADIT(lnv) 1(3)/AHD/CCM/Dissemi
modification 1(3)/AHD/CCM/Disse nation /e-mail/l5-16
for tax evasion, mination /e-mail/l5-16 dated 17.03.2016 in
carried out dated 17.03.2016 in respect of Client Code
coordinated limited respect of Client Code Modification,
purpose surveys u/s Modification, dissemination of
133A of the Income dissemination of beneficiary clients who
Tax Act, 1961 at the beneficiary clients have taken contrived
premises of 12 who have taken losses and shifted out
brokers and few of contrived losses and profits during the F.Y.
their clients across shifted out profits 2008-09 to 2011-12.
India on 23.03.20I5. during the F.Y. 2008-
4 ......After analysis 09 to 2011-12. The Ahmedabad
of data received from Investigation Directorate,
NSE and after The Ahmedabad as an institution response
considering the Investigation to orchestrated misuse
contention of brokers, Directorate, as an for client code
it is concluded by the institution response to modification for tax
ADIT that CCM has orchestrated misuse evasion, carried out
been used as a tool for for client code coordinated limited
tax evasion. The modification for tax purpose surveys u/s
genuine contentions of evasion, carried out 133A of the Income Tax
brokers have been coordinated limited Act, 1961 at the premise
duly addressed in the purpose surveys u/s of 12 brokers and few of
Survey Report. Only 133A of the Income their clients across India
settled trades have Tax Act, 1961 at the on 23.03.2015. After
been considered to premise of 12 brokers considering the
arrive at the and few of their contention of brokers, it
beneficiaries. clients across India on was concluded by the
23.03.2015. After ADIT that CCM has been
considering the used as a tool for tax
contention of brokers, evasion and only settled
it was concluded by trades have been
the ADIT that CCM considered to arrive at
has been used as a tool the beneficiaries.
for tax evasion and
only settled trades As per information
have been considered received, it is seen that
to arrive at the the assessee during the
beneficiaries. F.Y. 2008-09 has profit
shifted out of Rs.
As per information 20,29,332/- and losses
received in this case, shifted in of Rs.
it is seen that the 3,98,825/- resulting in
assessee during the net reduction in income
F.Y. 2008-09 has of Rs. 16,30,506/ through
profit shifted out of Client Code
Rs. 20,29,332/- and Modification.
losses shifted in of Rs.
3,98,825/- resulting in In view of the above
net reduction in precise information
income of Rs. received from ADIT, I
16,30,506/ through have reasons to believe
Client Code that income of assessee
Modification. has escaped assessment.
In view of the above, Keeping in view of the
approval of the Id. above facts, it is
Principal requested that necessary
Commissioner of approval u/s 151(1) may
Income Tax, Delhi - kindly be accorded for
14,New Delhi to issue initiating proceedings
notice u/s 148 of the u/s 148 of the Income
IT Act 1961, in this Tax Act, 1961 in order to
case is solicited. book income which had
escaped assessment.
(Undated)
Date: 23.03.2016
9. As would be evident from the above, the information which
triggered the initiation of action was based upon an information
received via email from the Ahmedabad Investigation Directorate3.
The aforesaid report alluded to certain conclusions prima facie arrived
at by that Directorate on analysis of data received from the National
Stock Exchange, and on the basis whereof the Directorate opined that
the Client Code Modification4 system had been used as a tool for tax
evasion. Upon receipt of the aforesaid report, the AO while apprising
the petitioner of the reasons which warranted re-assessment being
undertaken, referred to the report of the Directorate and alluded to an
„orchestrated misuse‟ of CCM with a motive to evade tax. It also
referred to a coordinated limited purpose survey undertaken under
Section 133A of the Act at the premises of twelve brokers as well as
Directorate
CCM
their clients across India in March 2015. On the basis thereof, the AO
formed the opinion that the petitioner had during Financial Year 2008-
09 shifted out profit of a sum of INR 20,29,332/- and shifted in losses
amounting to INR 3,98,825/-, thereby resulting in a net reduction of
income of INR 16,30,506/- through misuse of CCM.
10. The recordal of facts and reasons in the proforma would clearly
indicate that information was identically transcribed on the record of
the respondent as well. In our considered opinion, the minor
discrepancies in the language employed by the respondent, and as it
stands reflected in the reasons provided to the petitioner, and that which
exists on the record, would clearly not justify us interfering with the
impugned notice and the order impugned for reasons which follow. As
would be evident from a perusal of the reasons which were supplied to
the petitioner, there is a clear and unequivocal expression of opinion of
the AO with respect to the material on the basis of which reassessment
was sought to be commenced. The proforma also alludes to the same
material and record. There is thus no variation or difference in the
foundational material on the basis of which the AO came to form the
opinion that income has likely to have escaped assessment. What needs
to be emphasized while dealing with challenges like the present is that
we would not countenance two separate and distinct set of reasons
being maintained by the respondent for commencement of
reassessment. The reasons which are conveyed to the assessee must be
the same as those which exist on the record. A minor variation in the
language in which that information is conveyed to the assessee would
not constitute a justifiable ground to interfere with the reassessment
power.
11. Annexure P-7 which is a copy of the reasons supplied to the
petitioner clearly tallies with Annexure R-6 which appears on our
record except for the proforma additionally referring to the information
being the basis for the AO having reason to believe that income of the
assessee had escaped assessment. The aforesaid minor difference would
in our considered opinion consequently have no conceivable impact on
the validity of the proceedings.
12. In this backdrop, we also observe that the decision of our Court
in Haryana Acrylic Manufacturing Company v. Commissioner of
Income Tax5, as relied upon by Mr. Lalchandani, would not apply in
the facts of the present case, since in that case the reasons supplied to
the petitioner were substantially different from the reasons recorded in
the proforma form for initiating proceedings under Section 148 of the
Act. Further, in that case, the reasons supplied to the petitioner also
failed to disclose the allegation of the petitioner failing to disclose true
and material facts for assessment which was the basis for initiating
proceedings under Section 148 of the Act. Those facts clearly
distinguish the judgment in Haryana Acrylic from the facts of the
present case.
13. Similarly, we find that the decision of our Court in Sabh
Infrastructure Ltd v. Assistant Commissioner of Income Tax6 as
also of the Bombay High Court in Hindustan Lever Ltd v. RB
Wadkar7 would be inapplicable in the facts of our case, since both
Neutral citation - 2008:DHC:2967-DB
2017 SCC Online Del 10863
2004 SCC Online Bom 154
those decisions related to the requirement of sufficient reasons being
recorded by the AO before initiating proceedings under Section 148.
14. In the facts of the present case, the AO in its reasons recorded
and supplied to the petitioner has explicitly recorded the allegation,
basis which reassessment under Section 148 is sought to be initiated
against the petitioner. Therefore, the decisions in Sabh Infrastructure
Ltd and Hindustan Lever Ltd, as relied upon by the petitioner would not
apply in the facts of the present case.
15. Accordingly, and in view of the above, we find no merit in the
challenge as raised. The writ petition fails and shall stand dismissed.
Consequently, we see no reason to set aside the impugned Section 148
notice dated 31 March 2016 or the impugned order dated 25 July 2016,
the Section 143(2) notice dated 10 June 2016 as also the Section 142(1)
notice dated 01 August 2016. However, all contentions of the petitioner
assessee on merits are kept open to be urged in the course of the
assessment proceedings.
YASHWANT VARMA, J
PURUSHAINDRA KUMAR KAURAV, J
MARCH 20, 2024/kk
