Prakashchandra Chhotalal Shah vs Office Of The Income Tax Officer 1
2023 Latest Caselaw 1532 Guj

     C/SCA/15413/2022                                JUDGMENT DATED: 14/02/2023




           IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

            R/SPECIAL CIVIL APPLICATION NO. 15413 of 2022

                                       With

          CIVIL APPLICATION (FOR DIRECTION) NO. 1 of 2023
                                In
           R/SPECIAL CIVIL APPLICATION NO. 15413 of 2022
==================================================
                        PRAKASHCHANDRA CHHOTALAL SHAH
                                       Versus
                        OFFICE OF THE INCOME TAX OFFICER 1
==================================================
Appearance:
MR. JAIMIN R DAVE(7022) for the Petitioner(s) No. 1
SHIVAM D PARIKH(9477) for the Petitioner(s) No. 1
NOTICE SERVED BY DS for the Respondent(s) No. 1,2
==================================================

 CORAM:HONOURABLE THE CHIEF JUSTICE (DESIGNATE) MS.
       JUSTICE SONIA GOKANI
       and
       HONOURABLE MR. JUSTICE SANDEEP N. BHATT

                                 Date : 14/02/2023
                                 ORAL JUDGMENT

(PER : HONOURABLE THE CHIEF JUSTICE (DESIGNATE) MS. JUSTICE SONIA GOKANI)

1. This Court on 8.8.2022 issued notice which has been

served in the month of August 2022.

2. This petition under Article 226 of the Constitution of India

challenges validity and legality of the notice dated 16.3.2022

issued by the respondent No.1 under Section 148A(b) of the

Income-Tax Act, 1961 (hereinafter referred to as 'the Act') for

C/SCA/15413/2022 JUDGMENT DATED: 14/02/2023

Assessment Year 2018-19 read with the order, rejecting

objections of the petitioner dated 7.4.2022 passed by the

respondent No.1 under Section 148A(d) of the Act, and all

consequential proceedings.

3. Rule made returnable forthwith. Learned Senior Standing

Counsel Mrs. Kalpana Raval, assisted by learned Standing

Counsel Mr. Karan Sanghani, waives service of notice of rule for

and on behalf of the respondent.

4. The petitioner is an individual, engaged in the business of

trading. The petitioner filed return of income for AY 2018-19

under Section 139(1) of the Act on 24.8.2018 declaring total

income of Rs.2,79,080/-.

5. The return of income of the petitioner was assessed under

Section 143(1) of the Act and an intimation under Section

143(1) of the Act dated 13.10.2018 was issued, accepting the

returned income. A show cause notice was issued under Section

148A(b) of the Act on 16.3.2022 stating that he has information

which suggests that the income, chargeable to tax, for AY 2018-

19 has escaped assessment within the meaning of Section 147

C/SCA/15413/2022 JUDGMENT DATED: 14/02/2023

of the Act and required the petitioner to show cause as to why

notice under section 148 of the Act should not be issued in his

case for AY 2018-19 on the basis of information contained in

annexure to the said notice. It appears that the information was

flagged on Insight Portal in accordance with the Risk

Management Strategy formulated by the CBDT that the

petitioner has entered into suspicious transaction of

Rs.31,12,000/-. The petitioner's grievance is that he does not

contain even nature of the transaction which is alleged to be

suspicious and other details, such as, name of the parties with

whom transaction was entered; amount involved, date when

transaction was entered into; material in possession of the

respondents leading them to believe that the transaction is

suspicious which has resulted into escapement of income, etc. It

is the further grievance of the petitioner that without any

further discussion as to the tangible material in possession of

respondent No.1, exact source of information, discussion on

petitioner's nexus with information available with the

respondent No.1, the respondent No.1 came to the conclusion

that the above information suggests that income chargeable to

C/SCA/15413/2022 JUDGMENT DATED: 14/02/2023

tax has escaped assessment. Therefore, the petitioner has

sought the following reliefs:

"54(a) issue a writ and/or order and/or direction in the nature of certiorari or any other appropriate writ, order or direction, calling for all the records and proceeding to the present petition and after going through the same, quash the impugned order passed u/s 148A(d) of the Act dated 07.04.2022 (Annexure-B), notice issued u/s 148A(b) of the Act dated 16.03.2022 (Annexure-A) as well as consequential notice issued u/s 148 of the Act dated 26.05.2022 (Annexure-E) by respondent No.1 and any consequential action arising thereto;

(b) pending the hearing and final disposal of this petition, the operation of the impugned order passed u/s 148A(d) of the Act dated 07.04.2022 (Annexure-B), notice issued u/s 148A(b) of the Act dated 16.03.2022 (Annexure-A) as well as consequential notice issued u/s 148 of the Act dated 26.05.2022 (Annexure-E) by respondent No.1 and any consequential action arising thereto, be stayed;"

C/SCA/15413/2022 JUDGMENT DATED: 14/02/2023

6. We have heard Mr. Jaimin R. Dave, learned advocate for

the petitioner and Mrs. Kalpana Raval, learned Senior Standing

Counsel assisted by learned Standing Counsel Mr. Karan

Sanghani, who waives service of notice of rule for and on behalf

of respondent.

7. Having heard both the sides and having considered the

material on record, a notice dated 16.3.2022 under Section

148A(b) of the Income Tax Act, 1961 was issued, after

obtaining prior approval of CBDT, Ahmedabad. The notice

indicates that the information in case of the petitioner was

flagged on 'Insight Portal' in accordance with the Risk

Management Strategy formulated by the CBDT. On verification

of all the information and documents available on record, it has

been observed that there is an escapement of income of

Rs.31,12,2000/- which is being represented in the form of

assets. Thus, the basic criteria of income chargeable to tax,

represented in the form of assets and amount escaping

assessment being greater than fifty lakh rupees; as specified

under Section 149(1)(b) of the Income Tax Act, is said to have

been satisfied.

C/SCA/15413/2022 JUDGMENT DATED: 14/02/2023

8. It is not out of place to make a mention about the order

passed under clause (d) of Section 148 of the Income Tax Act

and make a specific mention, while disposing of the objection of

the petitioner that the assessee has not submitted any

explanation or evidence which also required a search action that

came to be carried out on 3.12.2021 in the premises of

Mahendra C. Mehta at Surat who is said to be in the statement

recorded during the search. It reads as under:

"b. With regard to the merits of the issue, the assessee has not submitted any reply or explanation or evidence. In this regard, it is relevant to mention that a search action was carried out on 03.12.2021 in the premises of Mahendra C. Mehta at Surat. The key person in the statement recorded during search had admitted the modues operandi of suppression of two zeros in the entries. Digital data found and corroborated revealed that Mahendra C. Mehta had made such transactions with various parties by following similar modus operandi. It is also established from the seized data that the assessee had made unexplained investment in the transactions with Mahendra C. Mehta amounting to Rs.31,12,000/-. Thus, the assessee has made

C/SCA/15413/2022 JUDGMENT DATED: 14/02/2023

unaccounted transactions of investment which were not found genuine on the basis of corroborative evidence and admission of the Mahendra C. Mehta."

9. It is alleged that rather than furnishing proper explanation

and justification to prove genuineness of the transaction, the

petitioner has tried to drag the issue by way of filing legal

citations without giving explanation about the source of

unexplained investment.

10. This is a clear violation of the requirement of principles of

natural justice and also the statutory requirement under the

law. The information which is furnished to the petitioner a name

of a person if it can be mentioned in the order disposing of the

objection categorically, there is no reason as to why the same

would not have been supplied to the petitioner - assessee. If the

said action was the result of the recorded statement and

thereafter issued notice on finding a nexus between these two,

the least which could be done at the end of the furnished

requisite details for necessary to meet with the allegation and

presents its case appropriately. In absence of basic details of

the name of the persons with whom the petitioner is said to

C/SCA/15413/2022 JUDGMENT DATED: 14/02/2023

have made unexplained transaction, how is it expected to reply

to the same by cropping in dark. Resultantly, we appreciate the

fairness of learned advocate not stretching the case beyond the

point, and also endorsing clearly that a name of the person with

whom the alleged dealing was of issuance of notice had not

been disclosed any information supplied to the petitioner.

10. Resultantly, the petition is allowed by quashing and

setting aside the order dated 7.4.2022 passed u/s 148A(d) of the

Act (Annexure-B); notice dated 16.3.2022 issued u/s 148A(b) of

the Act (Annexure-A) as well as consequential notice dated

26.5.2022 issued u/s 148 of the Act (Annexure-E) by respondent

No.1 and consequential proceedings pursuant thereto. Let the

process be undertaken stage-by-stage from where the stage was

left. The petitioner shall be furnished information with all

requisite details which shall include the name of the party with

whom the petitioner is said to have transacted. If there is any

other material sought to be relied upon by the respondent

authority, it would be incumbent upon it to furnish those details.

Let the same be furnished within 7 days from the date of receipt

of a copy of this judgment, and once the same is received, the

C/SCA/15413/2022 JUDGMENT DATED: 14/02/2023

reply shall be furnished in addition to the reply which has

already been furnished within 15 days. The procedure to be

followed by the petitioner thereafter shall be in accordance with

the law.

11. Rule is made absolute to the aforesaid extent.

12. Civil Application does not survive in view of the judgment

delivered in the main petition.

(SONIA GOKANI, CJ (DESIG.))

(SANDEEP N. BHATT,J) Bharat