Gujarat High Court

Onir Infraspace Private Limited vs Income Tax Officer Ward 3(1)(1) on 1 October, 2024

Author: Bhargav D. Karia

Bench: Bhargav D. Karia

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                          C/SCA/12704/2024                                     JUDGMENT DATED: 01/10/2024

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                                   IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                                    R/SPECIAL CIVIL APPLICATION NO. 12704 of 2024


                      FOR APPROVAL AND SIGNATURE:


                      HONOURABLE MR. JUSTICE BHARGAV D. KARIA

                      and
                      HONOURABLE MRS. JUSTICE MAUNA M. BHATT

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                      1     Whether Reporters of Local Papers may be allowed                         No
                            to see the judgment ?

                      2     To be referred to the Reporter or not ?                                  No

                      3     Whether their Lordships wish to see the fair copy                        No
                            of the judgment ?

                      4     Whether this case involves a substantial question                        No
                            of law as to the interpretation of the Constitution
                            of India or any order made thereunder ?

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                                             ONIR INFRASPACE PRIVATE LIMITED
                                                          Versus
                                             INCOME TAX OFFICER WARD 3(1)(1)
                      ===============================================================
                      Appearance:
                      MR B S SOPARKAR(6851) for the Petitioner(s) No. 1
                      MRS KALPANA K RAVAL(1046) for the Respondent(s) No. 1
                      ===============================================================

                          CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
                                and
                                HONOURABLE MRS. JUSTICE MAUNA M. BHATT

                                                           Date : 01/10/2024

                                                           ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

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1. Heard learned advocate Mr.B.S.Soparkar for

the petitioner and learned Senior Standing

Counsel Mr.Karan Sanghani for learned advocate

Mrs.Kalpana K. Raval for the respondent.

2. Rule, returnable forthwith. Learned Senior

Standing Counsel Mr.Karan Sanghani waives

service of notice of rule for and on behalf of

the respondent.

3. By this petition under Article 226 of the

Constitution of India, the petitioner has

challenged notice dated 05.03.2024 issued

under Section 148A(b) of the Income Tax Act,

1961 (for short 'the Act') and order dated

24th March, 2024 passed under Section 148A(d)

of the Act and the consequential notice of the

same date issued under Section 148 of the Act.

4.1. The brief facts of the case are that

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the petitioner-company which is incorporated

under the provisions of the Companies Act,

2013 on 17.10.2019 filed return of income for

Assessment Year 2020-21 declaring total income

of Rs.2,58,250/- on 27.11.2020 which was

processed under Section 143(1) of the Act on

28th March, 2021 accepting the returned

income.

4.2. The respondent issued an impugned

notice under Section 148A(b) of the Act on

05.03.2024 requiring the petitioner to furnish

information with respect to source,

genuineness and creditworthiness of the

persons who gave loans to the petitioner.

4.3. The petitioner filed detailed reply

dated 16th March, 2024 objecting to the

validity of the impugned notice on the ground

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that such notice does not disclose any

information with regard to the escaped income

of the petitioner but it is in nature of

inquiry to be conducted under Section 148A(a)

of the Act.

4.4. The respondent passed the impugned

order dated 24th March, 2024 under Section

148A(d) of the Act rejecting the objection of

the petitioner and issued the notice under

Section 148 of the Act for re-opening of the

assessment.

5.1. At the outset, learned advocate

Mr.B.S.Soparkar for the petitioner submitted

that the impugned show-cause notice issued

under Section 148A(b) of the Act is

fundamentally bad as there is no information

which suggest that the income had escaped

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assessment and there is no inspection on part

of the assessee which require to issue the

notice to re-open the assessment.

5.2. It was further submitted that the

reply of the petitioner is also not considered

in proper perspective while passing the

impugned order under Section 148A(d) of the

Act as the same is passed entirely on

different issue for which no notice under

Section 148A(b) of the Act was issued. It was

submitted that the respondent-authority could

not have rectified the notice issued under

Section 148A(b) of the Act in the order passed

under clause (d) of Section 148A of the Act.

5.3. Referring to the impugned order dated

24th March, 2024, it was pointed out that the

order is passed on different basis requiring

on the ground that the loan obtained by the

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petitioner is not used for the business

purpose and accordingly, the entire order is

on a different tangent. It was therefore

submitted that there is no violation of

contractual conditions by the petitioner by

utilising the loan to purchase the property

and even if it be so it does not amount to

escapement of income for the respondent to

take any action.

5.4. Learned advocate Mr.B.S.Soparkar,

however, emphatically submitted that the

impugned notice issued under Section 148A(b)

of the Act is in nature of inquiry and the

same is not issued as per the provisions of

the said section. It was submitted that in the

impugned notice, the respondent has called

upon the petitioner to submit the information

for verification which is not the requirement

under the provisions of the Act.

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5.5. In support of his submissions,

reliance was placed on the decision of this

Court in case of Safal Constructions India

Private Limited Through Director Rupesh

Balvantbhai Brahmbhatt versus Assistant

Commissioner of Income Tax Cent Circle 1(4)

Ahmedabad rendered on 19.10.2023 in Special

Civil Application No.10111 of 2023.

6.1. On the other hand, learned Senior

Standing Counsel Mr.Karan Sanghani for the

respondent submitted that merely because the

names of the other companies are mentioned in

the impugned notice, the same would not

invalidate the notice as the petitioner has

not disputed about the investment made in the

Krish Group of Companies owned by Mr.Amit

Katiyal and family members and it was found

from the information that the said vendors of

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the property of the petitioner were managing

all the affairs of the group companies and on

the basis of the analysis, it was found that

most of the entities were the shell entities

used primarily for routing the funds.

6.2. It was submitted that the petitioner

has also not denied the investment of Rs.61

crore in the property situated at Delhi and

accordingly, as per the information

information, it was found that the petitioner

obtained the loans from the companies whose

verification was required to be done and

accordingly, the impugned notice was issued

and the order was also passed taking into

consideration the reply of the petitioner

which clearly shows that the loans obtained by

the petitioner was not utilised for the

purpose for which it was obtained. It was

therefore submitted that no interference is

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called for in the impugned order passed under

Section 148A(d) of the Act.

6.3. In support of his submissions,

reliance placed on the decision of the Hon'ble

Culcutta High Court in case of Champa Impex

Private Limited versus Union of India reported

in [2024] 158 taxmann.com 629 (Culcutta) and

the decision of the Hon'ble Rajasthan High

Court in case of Mohd. Sajid Bains versus

taxman.com 559 (Rajasthan) to submit that the

writ petitions filed by the petitioner

challenging show-cause notice issued under the

Act is to be dismissed as the same are issued

on the basis of the information available with

the respondent-Assessing Officer and on

considering the reply filed by the petitioner,

prima-facie opinion is formed by the

respondent-Assessing Officer that it is a fit

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case to re-open the assessment of the year

under consideration.

7. Considering the submissions made by

learned advocates for the respective parties

and on perusal of the impugned notice issued

under Section 148B of the Act, it is not in

dispute that the said notice is issued for

calling upon the petitioner to submit various

details for verification of the data which

leads to the only conclusion that the notice

is issued for inquiry as contemplated under

Section 148A(a) of the Act. The relevant

portion of the said notice is reproduced

hereinbelow :

"As per the above report, the assessee has introduced long term borrowings of Rs.61,00,00,000/- just after the incorporation of the assessee company and the source, genuineness and creditworthiness of the person from

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whom loan received by the assessee has to be verified.

1) With respect to the long term borrowings of Rs.61,00,00,000/- taken during the Financial year, kindly submit the below specified details:

a) Name and address of the lenders of the loan.

b) PAN of the lenders.

c) Amount of loan accepted during the year.

d) Amount of loan repaid during the year (squared up loan).

e) Quantum of interest paid and rate of interest.

f) Business purpose for which the loan was taken and income earned by utilisation of funds.

2) Provide documentary evidence to substantiate the identity of the lenders and ITR of last 3 years of the lenders to substantiate the creditworthiness of the lenders.

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3) Kindly provide documentary evidence to substantiate the genuineness of the above specified transaction. In case of failure to furnish the above details, it may be treated that the income to the tune of Rs.61,00,00,000/- has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all the material facts necessary for assessment year 2020-21 within the meaning of section 147 of the Income Tax Act. On verification of the information flagged in the case of the assessee, it appears that income chargeable to tax has escaped assessment and therefore, before forming the opinion for issuing the notice under section 148, an opportunity of being beard is required to be provided to the assessee as per provisions of section 148A(b) of the Act. Therefore, it is proposed to issue a letter as per provisions of section 148(b) of the Act, requesting the assessee to show cause as to why a notice under section 148 should not be

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issued on the basis of the information which suggest that income chargeable to tax has escaped assessment for the assessment year under consideration."

8. On perusal of the above details called for

by the respondent in the notice issued under

Section 148A(b) of the Act, it would be

germane to refer to Section 148A(b) of the

Act, which reads as under :

"Section 148A(b): provide opportunity of being heard to the assessee, [***] by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable

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to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a)."

9. On perusal of the above provisions, it

appears that the Assessing Officer before

issuing the notice under Section 148 of the

Act has to conduct the inquiry with prior

approval of the specified authority with

respect to the information which suggest that

the income chargeable to tax has escaped the

assessment and after such inquiry, issued the

notice under Section 148A(b) of the Act to

provide an opportunity of being heard to the

assessee by serving a show-cause notice.

However, in the facts of the case, the

respondent has issued the notice under clause

(b) of the Section 148A of the Act as if the

inquiry is to be conducted under clause (a) of

Section 148A of the Act and therefore, the

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impugned notice cannot be commensurate the

requirement of clause (b) of Section 148A of

the Act as such notice could have been issued

only after conducting the inquiry on part of

the respondent-Assessing Officer.

10. In case of Safal Constructions India

(Supra), this Court in similar facts, has held

as under :

"[36] Considering the above facts, notice dated 28th March 2023 along with the Annexures issued under Section 148A(b) of the Act cannot be said to be the notice requiring the assessee to provide an opportunity of hearing to show cause as to why the notice under Section 148 of the Act should not be issued on the basis of the information which suggests that the income chargeable is escaped assessment. The notice is only in the nature of inquiry as contemplated under Section 148A(a)

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of the Act, which provides that before issuance of any notice under Section 148 of the Act, the Assessing Officer shall conduct an inquiry, if required, with prior approval of the specified authority with respect to the information which states that the income chargeable is escaped assessment. Therefore, though the notice was issued under the provisions of Section 148A(b) of the Act, in fact, such notice is under Section 148A(a) of the Act as the ingredients of notice which requires as per the statutory provisions of Section 148A(b) are not mentioned. The Assessing Officer has not provided any details with regard to income which has escaped assessment, but has called for the details for the period from the Financial Year 2014-15 to 2015-16 without mentioning the income as escaped assessment for the relevant Assessment Year 2016-17.

[37] The Assessing Officer, for the first time, in the order passed under

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Section 148A(d) of the Act has mentioned about bifurcation of the total transaction of Rs.791.22 Crores out of which credit entries amounting to Rs.86,63,62,755/- was mentioned pertaining to the period from 1st April 2015 to 27th April 2015 in the Suspicious Transaction Report.

[38] On perusal of the impugned order under Section 148A(d) of the Act, the Assessing Officer did not consider any of the contentions raised on behalf of the assessee on merits and reiterated only extract from the Suspicious Transaction Report in para 6.2 of the order. The assessee has been given the entire details of transaction in reply along with the annexures, however, the Assessing Officer did not consider the same and only observed that the assessee did not adduce any supporting document establishing the identity of the parties, genuineness of transaction and creditworthiness of the counter parties justifying the bank account

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transactions carried out are related to the business parties of the assessee. On perusal of the record, it appears that the petitioner - assessee has submitted all the details along with reply filed on 9th May 2023,. In such circumstances, in view of the above facts, the impugned assessment order under Section 148A(d) of the Act is not sustainable as the Assessing Officer has failed to set out any opinion on the basis of the available information and material on record to arrive at the finding that it is a fit case to reopen the assessment under Clause (b) of Section 148A of the Act. In the case on hand, we are not required to examine the correctness of the contentions qua the facts of the case as raised on behalf of the petitioner as it would be premature as the case of the petitioner is based upon the legal contentions that the notice under Section 148A(b) of the Act is in the nature of notice under Section 148A(a) of the Act and that the notice issued under Section

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148A(b) is without considering the contentions raised by the assessee in the reply to the notice under Section 148A(b) of the Act as per Clause (c) of Section 148A of the Act. On perusal of the notice under Section 148A(b) of the Act, it is clearly seen that the annexures do not contain any information, it is a questionnaire requiring the petitioner to provide details as sought for and therefore, it was an intention of the Assessing Officer who was to conduct an inquiry after receiving information from the assessee and therefore, notice is deemed to be the notice under Section 148A(a) of the Act. Thus, there is a gross procedural error from the very inception of the procedure rendering the same is bad in law.

[39] For the reasons recorded as above, as the notice dated 28th March 2023, though stated to be issued under Clause

(b) of Section 148A of the Act, the same is, in fact, a notice under Clause

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(a) of Section 148A of the Act can be treated as such. As the time to issue notice under Section 148A(b) of the Act has already expired, no purpose would be served by issuing direction to the Assessing Officer to conduct an inquiry considering the reply of the assessee as to whether to issue notice under Section 148A(b) of the Act or not."

11. In view of the above, we are of the

opinion that the impugned notice issued under

Section 148A(b) of the Act could not have been

issued for verification on the part of the

respondent-Assessing Officer and therefore,

the same would fail and accordingly, the

petition succeeds and the impugned notice

dated 05.03.2024 and the consequential order

under Section 148A(d) of the Act and the

notice under Section 148 are hereby quashed

and set aside. However, we make it clear that

if the respondent wishes to re-initiate the