Madras High Court
Annam Rajasekher Bindu vs The Income Tax Officer on 4 January, 2024
Author: Senthilkumar Ramamoorthy
Bench: Senthilkumar Ramamoorthy
W.P No.13579 of 2023
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 04.01.2024
CORAM
The Hon'ble Mr. Justice SENTHILKUMAR RAMAMOORTHY
Writ Petition No.13579 of 2023
&
WMP Nos.13256, 13257 & 13258 of 2023
Annam Rajasekher Bindu
W-113, III Avenue, Anna Nagar,
Chennai 600 040
PAN: BNKPB3637C ... Petitioner
vs.
1. The Income Tax Officer,
Non Corporate Ward – 17(6)
Income Tax Department,
No.121, Nungambakkam High Road,
Chennai-600 034.
2. The Principal Commissioner of Income Tax
Chennai
Income Tax Department
No.121, Nungambakkam High Road,
Chennai-600 034.
3. The Principal Chief Commissioner of Income Tax
Tamilnadu & Puducherry
Income Tax Department,
No.121, Nungambakkam High Road,
Chennai-600 034. ... Respondents
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W.P No.13579 of 2023
PRAYER : Petition filed under Article 226 of the Constitution of India
praying to issue a writ of Certiorari to call for the records of the Writ
Petitioner on the file of the 1st Respondent to quash the impugned
order u/s. 148A(d) of the Income Tax Act, 1961 dated 28.03.2023 in
DIN & Notice No.ITBA/AST/F/148A/2022-23/1051466692(1) for
the Assessment Year 2016-17.
For Petitioner : Mr.A.S.Sriraman
For Respondents: Dr.B.Ramaswamy,
Senior Standing Counsel (Income Tax)
ORDER
The petitioner challenges an order dated 28.03.2023 under
Section 148A(d) of the Income Tax Act, 1961 (the Income Tax Act)
and the consequential notice dated 28.03.2023 under Section 148
thereof.
2. The petitioner received a notice dated 28.02.2023 under
Section 148A(b) of the Income Tax Act calling upon the petitioner to
show cause as to why a notice under Section 148 should not be issued
in respect of the transactions specified in the annexure to the notice.
A reply dated 03.03.2023 was issued by the petitioner in respect
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thereof. Thereafter, the impugned order was issued concluding that
it is a fit case for issuance of notice under Section 148 of the Income
Tax Act. This writ petition was filed in the said facts and
circumstances.
3. Learned counsel for the petitioner assails the impugned
order on three grounds. The first ground is that the notice was issued
under Section 148A(d) entirely on the basis of information obtained
from the Insight Portal in accordance with the risk management
strategy of the Income Tax Department. In support of the contention
that information obtained on the Insight Portal cannot be the sole
basis for issuance of notice under Section 148, learned counsel relied
upon the judgment of the Bombay High Court in Anwar Mohammed
Shaikh v. Assistant Commissioner of Income Tax and Others in
W.P.No.2836 of 2022, order dated 13.03.2023, particularly paragraphs
24 and 25 thereof.
4. The next submission of learned counsel was that there is
no direct or live link between the information obtained from the
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Insight Portal and the income allegedly escaping assessment, and
that such direct link is an essential prerequisite for the issuance of a
notice under Section 148. In support of this proposition, learned
counsel relied on the judgment of the Bombay High Court in Digil
Electronics Pvt. Ltd. v. Assistant Commissioner of Income Tax and Others
in W.P.No.1798 of 2022, order dated 08.03.2023, particularly
paragraph 10 thereof. The last ground on which the impugned order
was challenged is that a finding was recorded therein on an issue not
raised in the show cause notice. In specific, he pointed out that it is
recorded in the impugned order that immovable property was
purchased for the sale consideration of Rs.1,25,00,000/-, whereas the
guideline value on which stamp duty was paid was Rs.1,42,75,000/-.
On this basis, the impugned order records that the differential sum of
Rs.17,75,000/- is assessable under Section 56(2)(vii)(b) of the Income
Tax Act as income from other sources. Learned counsel submits that
the show cause notice did not call for an explanation with regard to
the difference between the sale consideration and guideline value
and, therefore, the petitioner was denied an opportunity to respond.
By placing reliance on the judgment of the Calcutta High Court in
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Excel Commodity and Derivative (P.) Ltd. v. Union of India, [2023] 150
Taxmann.com 94 (Calcutta), particularly paragraph 8 thereof, learned
counsel submitted that Explanation 1 to Section 148 should not be
lightly resorted to for purposes of re-opening an assessment.
5. In response to these submissions, Dr.Ramasamy, learned
senior standing counsel for the respondents, contended that the
impugned order contains adequate reasons and does not warrant
interference. From internal page 3 of the order, learned counsel
pointed out that it is recorded therein that the market value of the
property was Rs.1,45,75,000/-, whereas the sale consideration was
Rs.1,25,00,000/-. According to learned senior standing counsel, the
petitioner was put on notice on this issue in the show cause notice, as
is evident from the second item in the annexure thereto which
indicates that a transaction of a market value of Rs.1,42,75,000/- took
place. Therefore, he submits that the petitioner had the opportunity
to respond but failed to provide a satisfactory explanation to the
show cause notice.
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6. He also pointed out that the impugned order records that
the petitioner did not provide any documentary evidence for receipt
of sums of Rs.31,25,000/- and Rs.8,75,000/- by way of gift from her
mother, Sri A.Premaleela. In conclusion, Dr.Ramasamy submitted
that the issuance of notice under Section 148 is a preliminary step and
that the petitioner has statutory remedies against any orders of re-
assessment passed pursuant thereto. He also referred to his counter
affidavit and the judgments in Red Chilli International Sales v. ITO
(2022) 140 Taxmann.com and Firm Rasulji Buxji Kathawala v. Income
Tax Commissioner, Delhi, AIR 1957 Raj 54, for the proposition that the
present writ petition is premature and should not be entertained.
7. The question that arises upon considering the rival contentions
is whether a case is made out to exercise discretionary jurisdiction.
The show cause notice dated 28.02.2023 was issued on the basis of
information gathered from the Insight Portal. By the show cause
notice, the petitioner was called upon to provide an explanation with
regard to the details set out in the annexure thereto and show cause
as to why a notice under Section 148 should not be issued.
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The annexure contains a table with three entries. The first two entries
relate to the purchase of an immovable property. The last entry
relates to a TDS statement for a sum of Rs.1,04,563/-.
8. In response to this show cause notice, the petitioner
issued a reply on 03.03.2023. In the said reply, the petitioner admits
that she purchased an old residential apartment on 05.10.2015 under
registered Document No.2963 of 2015. She states that the cost of
purchase was Rs.1,25,00,000/-. The source of funds have been
explained in paragraph 3 of the reply. The petitioner has stated that
she availed of a loan of Rs.93,75,000/- from Sundaram BNP Paribas.
The sanction letter relating thereto was enclosed. As regards the
remaining sale consideration, the petitioner stated that she received
gifts of Rs.31,25,000/- and Rs.8,75,000/- from her mother. The
petitioner also states that she had savings of Rs.2,69,000/- which
were used for this purpose. Thereafter, the petitioner has set out
particulars of the PAN of her mother and mentioned that her
mother's returned income for the Assessment Year 2016-17 was
Rs.43,42,000/-. In conclusion, the petitioner stated that the property
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purchased by her was let out for a monthly rent of Rs.25,000/-, and
that, after adjusting the interest paid on the home loan, there was a
net loss from the property.
9. In the impugned order, at paragraphs 1 to 3, the
background has been set out, including by extracting in full the reply
of the assessee. The operative portion of the order follows thereafter
and the same is set out below:
“On perusal of the sale deed revealed that
there is a difference between the sale amount shown
in sale deed and the Market Value, i.e. the stamp duty
value. Market Value was Rs.1,42,75,000/- but the sale
shown in sale deed was Rs.1,25,00,000/-
(1,42,75,000/- - 1,25,00,000/- = 17,75,000/-). The
difference of Rs.17,75,000/- is assessable
u/s.56(2)(vii)(b) of IT Act. It is also seen that there is
no documentary evidence for the value of Rs.31,25,000
and Rs.8,75,000/- mentioned as the gift deed from
Smt.A.Premaleela, as claimed by the assessee also
there is no evidence for the value of Rs.2,69,000
mentioned as savings.
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4. From the details/reply furnished by the
assessee it is seen that the assessee has not disputed
the evidence in the form of information provided by
the INSIGHT PORTAL in accordance with the Risk
Management Strategy. The document/evidence in
possession reveal that the income chargeable to tax is
represented in the form of expenditure spent towards
investment in immovable property exceeding Rs.50
lakhs.
5. In view of the above, I am satisfied that it is a
fit case for issuance of notice u/s. 148 of the IT Act,
1961 for the A.Y.2016-17.
6. This order u/s.148A(d) of the Income-tax
Act, 1961 is passed with the prior approval of the
specified authority (Principal Chief Commissioner of
Income-tax, Tamil Nadu and Puducherry) u/s 151 of
the Income-tax Act, 1961.”
10. On perusal of the operative portion of the order, it is
clear that the following findings were recorded:
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(i) the difference of Rs.17,75,000/- between the guideline
value of Rs.1,42,75,000/- and the sale consideration of
Rs.1,25,00,000/- is assessable under Section 56(2)(vii)(b) of the
Income Tax Act.
(ii) There is no documentary evidence for the amounts of
Rs.31,25,000/- and Rs.8,75,000/- received as gift from the petitioner's
mother.
(iii) There is no evidence for the sum of Rs.2,69,000/- said to
be available by way of savings.
11. As regards the first finding, the show cause notice did
not contain any reference to the difference between the guideline
value and the sale consideration and call for an explanation. Instead,
skeletal information regarding the purchase of the relevant
immovable property was provided under the first two entries. On
this basis, it cannot reasonably be expected of the noticee to provide
an explanation with regard to the difference. While the impugned
order refers to the lack of documentary evidence with regard to the
gifts received from the petitioner's mother, although necessary
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information was provided by the petitioner, there is no discussion or
evidence of consideration of the income tax returns of the petitioner's
mother so as to test the veracity of the petitioner's explanation.
Moreover, the explanation provided by the petitioner with regard to
the receipt of a home loan of Rs.93,75,000/- from Sundaram BNP
Paribas, which formed the alleged principal source for the purchase,
has not been dealt with in the impugned order. Unless an assessee's
response to the show cause notice is duly considered before a
decision is taken to issue notice under Section 148, the statutory
mandate of a prior show cause notice would be reduced to an empty
formality. Therefore, I am of the view that the impugned order calls
for interference and the said order is hereby quashed. Consequently,
the matter is remanded on terms set out below.
12. Because the impugned order raised an issue not
previously raised in the show cause notice, it becomes necessary for
the respondents to issue a fresh show cause notice calling for an
explanation with regard to all issues that warrant issuance of a notice
under Section 148 of the Income Tax Act. After providing a
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reasonable opportunity to the petitioner to respond to such notice,
the first respondent is directed to issue a fresh order under Section
148A(b) of the Income Tax Act. The above process shall be concluded
within a maximum period of three months from the date of receipt of
a copy of this order. The petitioner is directed to extend full co-
operation to ensure that the above exercise is completed within the
time specified.
13. W.P. No.13579 of 2023 is disposed of on the above terms.
Consequently, connected connected miscellaneous petitions are
closed. There shall be no order as to costs.
04.01.2024
Index : Yes/No
Internet : Yes/No
Neutral Citation : Yes/No
kal
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To
1. The Income Tax Officer,
Non Corporate Ward – 17(6)
Income Tax Department,
No.121, Nungambakkam High Road,
Chennai-600 034.
2. The Principal Commissioner of Income Tax
Chennai
Income Tax Department
No.121, Nungambakkam High Road,
Chennai-600 034.
3. The Principal Chief Commissioner of Income Tax
Tamilnadu & Puducherry
Income Tax Department,
No.121, Nungambakkam High Road,
Chennai-600 034.
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SENTHILKUMAR RAMAMOORTHY, J
kal
Writ Petition No.13579 of 2023
&
WMP Nos.13256, 13257 & 13258 of 2023
04.01.2024
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