Papadmalji Agro Foods Pvt. Ltd vs Union Of India ...
2023 Latest Caselaw 8651 Raj

[2023:RJ-JD:34551-DB]

HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Civil Writ Petition No. 6399/2023

Papadmalji Agro Foods Pvt. Ltd., Opp. Manav Bharti School, Gharsisar, Bikaner 334001 Rajasthan Through Its Director Jai Agarwal S/o Sri Roop Chand Agarwal, Aged About 42 Years, R/o Hanuman Gali, Rani Bazar, Bikaner.

----Petitioner Versus

1. Union Of India, Through Secretary, Department Of Revenue, Ministry Of Finance, Government Of India, New Delhi.

2. The Principal Commissioner Of Income Tax, Central Aaykar Bhawan, Statue Circle Jaipur

3. The Assistant Commissioner Of Income Tax, Central Circle, Bikaner Aaykar Bhawan, Rani Bazar Bikaner 334001

----Respondents

For Petitioner(s) : Mr Anil Bhansali For Respondent(s) : Mr K.K.Bissa Mr G.S.Chouhan

HON'BLE MR. JUSTICE VIJAY BISHNOI HON'BLE MR. JUSTICE YOGENDRA KUMAR PUROHIT

Judgment

18/10/2023 (Per Hon'ble Vijay Bishnoi,J.)

1. By way of this writ petition, the petitioner has challenged the

validity of the order dated 31.03.2023 passed under Section 148A

(d) of the Income Tax Act, 1961 (hereinafter referred to as 'the

Act'). The petitioner has also challenged the notice dated

05.04.2023 issued by the Assessing Officer under Section 148 of

the Act.

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2. Facts, necessary for adjudication, are that the petitioner, a

private limited company is engaged in the business of

manufacturing/trading of papad, namkeens, snacks and other

associated derivatives of such products.

3. A notice dated 03.03.2023 was issued to the petitioner under

Section 148(b) of the Act, whereby it was asked to show cause

why a notice under Section 148 of the Act should not be issued on

the basis of information available, which suggests that the income

chargeable to tax has escaped assessment for the relevant

assessment year 2019-20. The petitioner was required to file reply

to the said notice on or before 13.03.2023.

4. The petitioner submitted its reply on 12.03.2023, however,

requested to provide time to furnish further clarification/

information. The matter was adjourned to 20.03.2023 and

thereafter the petitioner submitted further clarification by filing

another reply dated 31.03.2023, however, after hearing the

petitioner, the order dated 31.03.2023 under Section 148A(d) of

the Act has been passed followed by notice under Section 148(b)

of the Act.

5. Assailing the order dated 31.03.2023 passed under Section

148A(d) of the Act and the consequential reassessment notice

issued under Section 148 of the Act, learned counsel for the

petitioner has argued that the proceedings initiated against the

petitioner are without jurisdiction. It is submitted that from the

notice dated 03.03.2023 issued under Section 148A (b) of the Act,

it is clear that basis of information, in the case of the petitioner,

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was a survey conducted on 04.03.2020 under Section 133A of the

Act. It is submitted that Explanation-2 (ii) to Section 148 of the

Act clearly defines expression 'information', on the basis of which,

the assessing officer can proceed in the cases of escaped

assessment.

6. It is contended that any information gathered during a

survey conducted under Section 133A of the Act before 1 st April,

2021, cannot be the basis for initiating proceedings against an

assessee under Section 148 of the Act. It is argued that in the

notice dated 03.03.2023 issued under Section 148A (b) as well as

the order dated 31.03.2023 passed under Section 148A(d) of the

Act, the assessing officer has mentioned that the basis of

information with him which suggests the income chargeable to tax

has escaped assessment, is the survey conducted on 04.03.2020

though he has no authority to take into consideration any

information gathered during survey conducted prior to 1st of April,

2021. It is, therefore, argued that the order dated 31.03.2023

issued by the assessing officer under Section 148A (d) of the Act

and consequential notice under Section 148 of the Act are without

jurisdiction and are liable to be quashed and set aside.

7. Learned counsel for the petitioner has further argued that

another ground for initiating proceedings against the petitioner

was that the petitioner-company issued shares on the basis of

valuation made by the accountant and not by the merchant

banker. It is submitted that as per Section 56(2)(viib) of the Act

and Rules 11UA of the IT Rules, the fair market value of unquoted

shares are required to be determined by merchant banker from

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24.05.2018. However, in the present case, the assessee had

executed Share Subscription Agreement and Share Holders

Agreement on 22.02.2018 in which all terms and conditions of

allotment of shares are mentioned and in those agreements, the

valuation report of the chartered accountant valuing the shares as

on 15.02.2018 has already been given. The Rule 11UA as it stood

on 15.02.2018 permitted the determination of fair market value of

unquoted equity shares by chartered accountant. It is submitted

that assessing authority, without considering or even without

understanding the said aspect of the matter, has illegally passed

the impugned order under Section 148A(d) and issued notice

under Section 148 of the Act.

8. Learned counsel for the petitioner has, therefore, prayed that

the impugned order passed under Section 148A(d) of the Act and

the notice issued under Section 148 of the Act may kindly be

quashed and set aside.

9. Per contra, learned counsel for the respondents has opposed

the writ petition and argued that there is no illegality in the

impugned order dated 31.03.2023 passed under Section 148A(d)

of the Act and notice dated 31.03.2023 issued under Section 148

of the Act.

10. It is submitted that the case of the petitioner is selected

pursuant to the Explanation 1(i) of Section 148 of the Act. It is

argued that the case of the assessee for the relevant assessment

year was selected under risk management strategy which is

formulated by the Board on 20.02.2023. It is wrong to contend

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that the case of the assessee is selected on the basis of

information collected during survey conducted on 04.03.2020

under Section 133A of the Act. Learned counsel has argued that

in para 2 of the notice dated 03.03.2023 issued under Section

148(b) of the Act, it is clearly mentioned that case of the

petitioner is selected on the basis of information flagged in insight

under the head High Risk CRIU/VRU for assessment year 2019-20.

The case is flagged as CRIU/VRU High Risk in Insight Portal in

accordance with the risk management. Learned counsel for the

respondents has, therefore, submitted that the challenge to the

order dated 31.03.2023 passed under Section 148(d) of the Act

and the notice dated 31.03.2023 issued under Section 148 of the

Act is without any merit and the same is liable to be rejected.

11. Learned counsel for the respondents has further submitted

that the shares issued by the assessee are to be analysed in two

tranches i.e. before 24.05.2018 and after 24.05.2018. It is

submitted the petitioner has issued 206185 shares at the rate of

Rs.388 during the year and total valuation of which comes to

Rs.7,99,99,780/-. It is also submitted that out of these 206185

shares, the petitioner issued 1,03,093 shares after 24.05.2018

However, as per Section 56(2) (viib) and Rule 11UA, the fair

market value of unquoted shares should be determined by

merchant banker from 24.05.2018, whereas the assessee has

issued shares on the basis of valuation report of BKA Associates,

who is an accountant.

12. Learned counsel has further submitted that the contention of

the petitioner that the shares' price already quoted in the

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agreement dated 22.02.2018 is not accepted. It is submitted that

all the details regarding issuance of shares need to be

communicated to Ministry of Corporate Affairs in the form of MGT-

14 at MCA website. It was observed that the petitioner filed MGT-

14 on 13.03.2018 with 25772 shares in MCA Portal, however, vide

letter dated 04.08.2022 and uploaded on ITBA Portal on

06.08.2022, the assessee submitted MGT-14 of 257732 shares

and the form was also bearing the same digital signature, date

and time. Noting this fact, the petitioner was specifically asked

why it submitted forged MGT-14 of 257732 shares but the

response of the petitioner was not satisfactory.

13. Learned counsel has submitted that from the above facts and

circumstances of the case, it is clear that sufficient reasons or

material was available with the assessing officer for reopening the

case of the petitioner. Learned counsel for the respondents has,

therefore, submitted that there is no merit in this petition and the

same is liable to be dismissed.

14. Heard learned counsel for the parties.

15. The petitioner is contending that as per Explanation 2(ii) of

Section 148 of the Act, the respondents have illegally initiated the

proceedings of reassessment against the petitioner because the

only information with the assessing officer was collected during a

survey conducted under Section 133A of the Act on 04.03.2020,

whereas the Explanation-2(ii) of Section 148 of the Act clearly

provides that the information received in a case of survey under

Section 133A of the Act after 01.04.2021 can only be taken into

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consideration. On the other hand, the respondents are contending

that since the case of the petitioner is selected as high risk case in

the Risk Management Strategy as per Explanation-1(i) of Section

148 of the Act, the proceedings are initiated.

16. Explanation-1(i) of Section 148 of the Act reads as under:-

"(i) any information in the case of the assessee for the relevant assessment year in accordance with the risk management strategy formulated by the Board from time to time;"

whereas, Explanation-2(ii) of Section 148 of the Act speaks thus;

"(ii) a survey is conducted under section 133A, other than under sub-section (2A) of that section, on or after the 1st day of April, 2021, in the case of the assessee."

17. In the notice dated 03.03.2023 issued to the petitioner

under Section 148A(b), it is clearly mentioned that case of the

petitioner is flagged in the insight under the head High Risk

CRIU/VRU for assessment year 2019-20. The case is flagged as

CRIU/VRU High Risk in Insight Portal in accordance with the risk

management. The order passed by the assessing officer under

Section 148A(d) also speaks that case of the petitioner is flagged

as CRIU/VRU High Risk case in Insight Portal in accordance with

the risk management.

18. In view of the above, we found that the assessing officer

has not initiated the proceedings under Section 148 of the Act

against the petitioner on the basis of information collected during

survey under Section 133A conducted on 04.03.2020 but for the

[2023:RJ-JD:34551-DB] (8 of 9) [CW-6399/2023]

reason that the case of the petitioner is selected under the risk

management strategy.

19. So far as second contention of the petitioner to the effect

that it issued shares on the basis of valuation made by the

accountant and not by the merchant banker is concerned, we

found that though in the Shares Subscription Agreement and the

Share Holders Agreement executed on 22.02.2018, the valuation

report of the CA valuing the shares as on 15.02.2018 had

already been given but admittedly the shares had been issued by

the petitioner prior and after 24.05.2018, whereas as per Section

56(2)(viib) of the Act and Rule 11UA of the IT Rules, after

24.05.2018, valuation of the shares is required to be determined

by the merchant banker.

20. Apart from that, in the facts and circumstances of the case,

we are of the opinion that with regard to the question of issuance

of shares without valuation by the merchant banker is

concerned, the question would be matter of enquiry by the

assessing officer that whether the valuation made by the

accountant before 24.05.2018 is sufficient as per the

requirement of law or not.

21. In exercise of jurisdiction under Article 226 of the

Constitution of India, once this Court finds that the impugned

order does not suffer from any procedural error and the same

has been passed after giving an opportunity of hearing, it is

advisable to restrain from interfering in the matter and left it

[2023:RJ-JD:34551-DB] (9 of 9) [CW-6399/2023]

open for the petitioner to raise all the grounds as raised in this

petition to explain the transaction regarding issuance of shares in

the assessment proceedings.

22. After going through the material available on record, we are

satisfied that prima facie material was available with the

department to proceed against the petitioner. Hence, we do not

find any case to interfere in the matter at this stage.

23. The writ petition is dismissed accordingly.

24. Stay petition also stands dismissed.

25. There will be no order as to costs.

(YOGENDRA KUMAR PUROHIT),J (VIJAY BISHNOI),J

masif/-D.R.

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