Gujarat High Court
Prakashchandra Chhotalal Shah vs Office Of The Income Tax Officer 1 on 14 February, 2023
Author: Sonia Gokani
Bench: Sonia Gokani
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
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PRAKASHCHANDRA CHHOTALAL SHAH
Versus
OFFICE OF THE INCOME TAX OFFICER 1
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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
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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 Page 1 of 9 Downloaded on : Fri Feb 17 20:44:47 IST 2023 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 Page 2 of 9 Downloaded on : Fri Feb 17 20:44:47 IST 2023 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 Page 3 of 9 Downloaded on : Fri Feb 17 20:44:47 IST 2023 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;"Page 4 of 9 Downloaded on : Fri Feb 17 20:44:47 IST 2023
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.
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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 Page 6 of 9 Downloaded on : Fri Feb 17 20:44:47 IST 2023 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 Page 7 of 9 Downloaded on : Fri Feb 17 20:44:47 IST 2023 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 Page 8 of 9 Downloaded on : Fri Feb 17 20:44:47 IST 2023 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 Page 9 of 9 Downloaded on : Fri Feb 17 20:44:47 IST 2023