Delhi High Court - Orders
Satish Chand Jain vs Assistant Commissioner Of Income Tax, ... on 20 February, 2024
Author: Yashwant Varma
Bench: Yashwant Varma, Purushaindra Kumar Kaurav
$~16
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 12364/2022 & CM APPL. 37118/2022 (Interim Stay)
SATISH CHAND JAIN ..... Petitioner
Through: Mr. Amol Sinha and Mr.
Kshitiz Garg, Advs.
versus
ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE
52(1), DELHI & ANR. ..... Respondents
Through: Mr. Shubhendu Bhattacharyya
and Mr. Kunal Sharma, Advs.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR
KAURAV
ORDER
% 20.02.2024
1. Despite four weeks' time having been granted to the respondents, no reply has been filed.
2. We otherwise note that the matter was heard in some detail by us on 19 January 2023. The petitioner assails the initiation of action under Section 148 of the Income Tax Act, 1961 ["Act"]. From a perusal of the order dated 22 July 2022, purported to have been passed under Section 148A(d) of the Act for Assessment Year ["AY"] 2013- 2014, we find that it was based solely upon the report of the Serious Fraud Investigation Office ["SFIO"].
3. While dealing with the aforesaid aspect, this Court on 19 January 2023 had observed as follows:
"CM Appl.37117/2022This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 26/02/2024 at 20:43:16
1. Allowed, subject to the petitioner filing legible copies of the annexures, at least three days before the next date of hearing.
W.P.(C) 12364/2022 & CM Appl.37118/2022 [Application filed on behalf of the petitioner seeking interim relief]
2. This writ petition is directed against the order dated 22.07.2022 passed under Section 148A(d), and the consequent notice of even date i.e., 22.07.2022, issued under Section 148 of the Income Tax Act, 1961 [in short, "Act"].
2.1. In addition thereto, a challenge is also laid to an intimation dated 22.07.2022, served on the petitioner.
3. To be noted, the impugned notice, intimation and order have been passed/issued concerning Assessment Year (A.Y.) 2013-14.
4. The principal allegation against the petitioner is that he has indulged in sale and purchase transactions on the National Spot Exchange Limited [in short, "NSEL"] platform, via a broker, namely, M/s Anand Rathi Commodities Ltd. [hereafter referred to as, "Broker"].
5. It is the contention of the respondents/revenue that the petitioner is a beneficiary of accommodation entries, as a result of the transactions executed on NSEL, via the aforesaid Broker.
6. The respondents/revenue allege that on account of eighteen (18) such transactions, from the list that has been furnished to the petitioner, income amounting to Rs.1,54,55,275/- has escaped assessment in the aforementioned A.Y.
7. The record, as presently available with the court, shows that in the reply filed by the petitioner, he has indicated that he had entered into eighteen (18) valid contracts, concerning purchase and sale of commodities, and the profit earned from such transactions, amounting to Rs.6,71,926/-, was offered for levy of tax. 7.1 The petitioner has also taken the stand that he was subjected to scrutiny assessment proceedings, pursuant to which an order under Section 143(3) of the Act was framed on 04.02.2016.
8. Mr Amol Sinha, who appears on behalf of the petitioner, concedes that the Serious Fraud Investigation Office (SFIO) is examining the transactions undertaken by various persons and entities on the NSEL platform. Mr Sinha, however, states that the Bombay High Court has appointed a Committee headed by a retired Judge of that Court. [See page 157 of the case file]. 8.1 It is stated by Mr Sinha that the SFIO had submitted a questionnaire to the petitioner in response to which the petitioner pointed out that he had to recover, in respect of various transactions, the following amounts:
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 26/02/2024 at 20:43:16
1. Liability towards NSEL 8.1. Please specify the exact amount 31.07.2013 - Rs.3,14,60,310/-
NSEL/defaulters owe to you as 31.03.2014 - Rs.2,95,55,465/- on 31.03.2014, 31.03.2015 and 31.03.2015 - Rs.2,94,34,752/- 31.03.2016. 31.03.2016 - Rs.2,94,34,752/-
8.2. Whether you have received any Yes. Rs.20,25,558/- from payment from NSEL/ your 21.08.2013 to 24.11.2014 Broker after 31st July, 2013 for Traders‟ Contract?
9. In any event, Mr Sinha says that out of the sixteen (16) transactions with regard to which information was furnished to the petitioner by way of notice issued under Section 148A(b) of the Act, the first four (4) transactions do not relate to the petitioner. It is also Mr Sinha's contention that the value attributed to even of the remaining transactions, cannot be taken as profits, as commodities have been purchased and sold as well.
10. The record shows that a coordinate bench on 21.11.2022, after examining the pages 754 to 828 of the SFIO report, noticed that the name of the petitioner was not mentioned therein. 10.1. It was in this context that Mr Kunal Sharma, learned senior standing counsel, who appears on behalf of the respondents/revenue, was directed to produce the entire report prepared by SFIO.
10.2. In view of this situation, at that juncture, the court had passed an interim order, to the effect, that while the AO is permitted to pass reassessment order, the same will not be given effect to till further orders of the Court.
11. Mr Sharma has carried a copy of the complete report prepared by the SFIO. We have queried Mr Sharma as to whether the petitioner's name is in the SFIO's report; Mr Sharma says that the petitioner's name is not mentioned in the report. 11.1 Clearly, the situation which obtained on 21.11.2022 has undergone a slight change i.e., Mr Sharma has satisfied himself that nowhere in the SFIO's report, the petitioner's name is mentioned. 11.2 It is Mr Sharma's contention that the assessing officer (AO) is still at the stage of inquiring as to whether the petitioner has been a beneficiary of accommodation entries.
12. A perusal of the order passed under Section 148A(d) of the Act shows that the AO only suspects the involvement of the petitioner. He has not formed an opinion that there is a reason to believe that the petitioner's income chargeable to tax has escaped assessment.
13. As noticed above, at this point, there is nothing in the SFIO report which connects the petitioner to the matter which is being examined by SFIO. The exercise of reassessment has been This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 26/02/2024 at 20:43:16 triggered, it appears, only on account of the input received from SFIO.
14. In these circumstances, we are of the view that the matter requires further examination.
15. Issue notice.
15.1 Mr Kunal Sharma accepts notice on behalf of the respondents/revenue.
16. A counter-affidavit will be filed within four weeks from today. 16.1. Rejoinder thereto, if any, will be filed before the next date of hearing.
17. Mr Sharma says that he would not like to place the SFIO report on record, especially, given the fact that the petitioner's name does not appear in the report and inquiry is being conducted vis-à-vis other persons/entities.
17.1. The statement of Mr Sharma is taken on record.
18. List the matter on 28.08.2023.
19. In the meanwhile, there shall be stay on the operation of the impugned order passed under Section 148A(d) and consequent notice issued under Section 148 of the Act.
20. Liberty is, however, given to the respondents/revenue to approach the court for vacation of the order, even before the returnable date, if any material emerges which points in the direction that the petitioner is a beneficiary of accommodation entries, as alleged. As and when the respondents/revenue approaches the court, the matter will be examined and appropriate orders will be passed."
4. As is manifest from the above, the respondents have not relied upon any material other than the SFIO Report so as to justify the invocation of Section 148 of the Act. As is evident from the above extracts, it was ultimately found that the said report had not recorded any adverse conclusions against the petitioner. Since the very foundation for initiation of action under Section 148 has concededly found to be unsubstantiated, there exists no justification for the continuance of the impugned proceedings. The respondents have also not brought to our attention any additional material which may have lent credence to the allegation of accommodation entries.
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 26/02/2024 at 20:43:17
5. We, accordingly, allow the instant writ petition and quash the order and notice dated 22 July 2022.
6. The petition stands disposed of along with pending application.
YASHWANT VARMA, J.
PURUSHAINDRA KUMAR KAURAV, J.
FEBRUARY 20, 2024/p This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 26/02/2024 at 20:43:17