Madhya Pradesh High Court
Mathura Mercantile Private Limited vs Principal Commissioner Of Income Tax ... on 26 April, 2022
Author: Sheel Nagu
Bench: Sheel Nagu
IN THE HIGH COURT OF MADHYA PRADESH AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE SHEEL NAGU
&
HON'BLE SHRI JUSTICE MANINDER S. BHATTI
ON THE 26th OF APRIL, 2022
WRIT PETITION NO.8905 OF 2022
Between:-
MATHURA MERCANTILE PRIVATE LIMITED,
THROUGH ITS DIRECTOR, SHRI NITIN DAGE,
S/O SHRI M.L. DAGA AGED ABOUT 44 YEARS,
R/O T.M.D. COMPLEX, SECOND FLOOR,
OPPOSITE HOTEL SAVERA, REWA ROAD, SATNA, M.P.
PETITIONER
(BY SHRI G.N. PUROHIT, SENIOR ADVOCATE ASSISTED WITH SHRI
ESHAN TRIPATHI, ADVOCATE)
AND
1. PRINCIPAL COMMISSIONER OF INCOME TAX,
JABALPUR-1, CENTRAL REVENUE BUILDING,
STATION ROAD, NAPIER TOWN, JABALPUR, (M. P.)
2. INCOME TAX OFFICER,
WARD-1, INCOME TAX OFFICE, SATNA (M.P.)
.....RESPONDENTS
(BY SHRI SANJAY LAL, ADVOCATE FOR RESPONDENT)
This petition coming on for admission and interim relief this day,
Hon'ble Shri Justice Maninder S. Bhatti passed the following:
ORDER
In the instant Writ Petition filed under Article 226/227 of the Constitution of India the petitioner challenges the order dated 31/03/2022 (Annexure P/7) issued under Section 148-A of Income Tax Act, 1961 and show cause notice dated 31/03/2022 (Annexure P/8) issued under Section 148 of Income Tax Act, 1961.
2. The facts reveal that petitioner which is a private company duly registered under the Companies Act, 1956, is being regularly assessed for the purposes of Income Tax. On 15/03/2022, the petitioner received a notice under Section 148-A(a) of the Income Tax Act calling upon the petitioner to explain the amount credited to its account through RTGS from Epoch Mercantile Pvt. Ltd. The petitioner submitted reply to that notice on 16/03/2022. However, the respondent then issued a notice to the petitioner under Clause (b) of Section 148-A of Income Tax Act on 22/03/2022 (Annexure P/5). The petitioner submitted its reply to this notice on 26/03/2022 and explained that the amount which was credited to his account amounting to Rs.19,20,000/- was received through RTGS from M/s Jai Dada Agrotech (P) Ltd. For purchase of shares. The petitioner disclosed the evidence from sources of funds of M/s Jai Dada Agrotech (P) Ltd. However, respondent then passed the impugned order dated 31/03/2022 and decided that after due consideration of the material available on record, the notice against the petitioner under Section 148 of Income Tax Act 1961 should be issued and resultantly a notice under Section 148 of Income Tax Act was also issued dated 31/03/2022 (Annexure P/8) which is also under challenge in the present case.
3. The main contention of the learned counsel of the petitioner is to the effect that the process of conducting an inquiry under Section 148-A of Income Tax Act is not an empty formality. On the contrary, the inquiry is in the nature of quasi judicial inquiry and therefore, the respondents were obliged to ensure adherence to the principle of natural justice. It is submitted by the learned counsel that Section 148-A of Income Tax Act provides that when the Assessing Officer intends to issue a notice under Section 148-A of Income Tax Act, it is required to issue a show cause notice to the assessee under Section 148-A of the Income Tax Act calling upon him to show cause within a period of seven days.
4. Learned counsel for the petitioner submits that in the present case notice was issued on 22/03/2022 and in the notice, the petitioner was directed to respond by 28/03/2022, thus, according to the petitioner the same was not a seven days clear notice.
4.1 Learned counsel for the petitioner submits that since the notice is of dated 22/03/2022, therefore, the period of seven days ought to commence from 23/03/2022 and thus, seven days time till 30/03/2022 ought to have been given to the petitioner. Thus, further submits that since the impugned notice is against the mandatory statutory provisions contained in Section 148-A of Income Tax Act, the exercise which is undertaken is ill founded.
4.2 The other submission which has been advanced by the counsel for the petitioner is to the effect that the petitioner while submitting reply to the show cause dated 22/03/2022 has brought to the notice of the authorities the entire facts, material and the source of amount which was ultimately credited to his account. However, according to the petitioner, the respondents without considering the reply, in a purely mechanical manner passed the impugned order dated 31/03/2022 (Annexure P/7) and decided to issue show cause notice under Section 148 of the Income Tax Act. Learned counsel submits that so called reasons which reflect from perusal of paragraph 3.4 of the impugned order dated 31/03/2022 (Annexure P/7) are grossly misconceived and infact based on conjectures and surmises and thus submits that since the authorities have not assigned cogent reason while passing the impugned order, the same is non est and thus deserves to be set aside.
4.3 In support of his contention learned counsel has placed reliance upon the decision of Apex Court in the case of Income Tax Officer, Calcutta and Ors. Vs. Lakhmani Mewal Das. in Civil Appeal No.2526/1972 and also in the decision of High Court of Madhya Pradesh in the case of H.H. Maharaja Martand Singh Ju Deo Vs. Wealth Tax Officer and Ors. reported in M.P. No.2270/1985 and submits that exercise of forming an opinion as regards issuance of notice under Section 148 of Income Tax Act is not an empty formality. On the contrary, the same requires due application of mind and thus has submitted that on the strength of the aforesaid decision the authority failed to apply its mind to the reply submitted by the petitioner to show cause notice and as such the order impugned as well as impugned notice deserve to be set aside.
5. Per contra, learned counsel for the respondent submits that the petitioner was given show cause notice before passing the order under Section 148-A of the Income Tax Act and the petitioner within a period of four days submitted its reply, therefore, the petitioner cannot challenge the notice on the ground that clear seven days time was not afforded. Learned counsel also submits that the sufficiency of material, is a decision which is required to be taken by the Assessing Officer and thus the Court cannot substitute its opinion as regards sufficiency of material.
5.1 It is also submitted by the learned counsel that the challenge to the order impugned is infact premature inasmuch as a notice under Section 148 of the Income Tax Act has been issued to the petitioner and that is still to be taken to its logical end, thus, the petitioner ought to have awaited the proceedings initiated pursuant to the issuance of notice under Section 148 of Income Tax Act, to be completed.
5.2 Learned counsel for respondent in support of his contention relied upon the judgment in the case of Raymond Woollen Mills Ltd. Vs. Income Tax Officer & Ors. in Civil Appeal Nos.1972 & 1973 of 1992.
5.3 For ready reference and convenience Section 148-A of Income Tax Act is reproduced in toto:
"148A. The Assessing Officer shall, before issuing any notice under section 148, --
(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
(b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, 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 to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);
(c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);
(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:
Provided that the provisions of this section shall not apply in a case where,--
(a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or
(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or
(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee.
Explanation.--For the purposes of this section, specified authority means the specified authority referred to in section 151.".
6. We have heard rival contentions of the parties and perused the record.
7. The first notice to the petitioner under Section 148-A(a) of the Income Tax Act was issued on 15/03/2022 (Annexure P/3) . The said notice contained two entries dated 11/05/2017 and 27/10/2017 by which the amount of Rs.19,20,060/- was credited twice to the account of petitioner and the notice informed the petitioner that the amount which was received by the petitioner's company in form of RTGS, was from bank account of one M/s Epoch Mercantile Private Limited.
8. The petitioner in response to this notice dated 15/03/2022 submitted its reply dated 16/03/2022 (Annexure P/4) where it has been mentioned that the petitioner did not have any financial transaction with M/s Epoch Mercantile Private Limited. Thereafter, the petitioner was issued another notice dated 22/03/2022 and was called upon to submit its reply by 28/03/2022 (Annexure P/5). However, this notice is not under challenge in the present petition. This notice was received by the petitioner who submitted its reply on 26/03/2022 i.e. within a period of four days from the date of issuance of notice. In reply to this notice, petitioner in paragraph 8 thereof, disclosed the sources of funds and it was stated by the petitioner that Epoch Mercantile Private Limited is NBFC registered with Reserve Bank of India. The petitioner enclosed registration certificate as well as bank statement of Epoch Mercantile Private Limited.
9. Reply of the petitioner was then considered by the respondents and the respondents while observing that there is receipt of Rs.19,20,000/- to petitioner's company from M/s Epoch Mercantile Private Limited through an intermediary company, M/s Jai Dada Agrotech (P) Ltd. which is routing funds to petitioner's company through Dummy shell Company and credit worthiness and real existence of both the aforesaid companies is a subject matter of verification, thus, AO was of the view that the petitioner's company being a beneficiary of aforesaid amount, an income to the tune of Rs.19,20,000/- has escaped assessment within the meaning of Section 147 of Income Tax Act and thus finding the case in hand to be a fit case, decided to issue a notice under Section 148 of the Income Tax Act (Annexure P/8).
10. Upon receipt of notice dated 22/03/2022, without any demur or protest, petitioner submitted reply on merit which runs into as many as 68 pages therefore, the petitioner at this stage now cannot question the issuance of show cause notice alleging contravention of Section 148-A of the Income Tax Act. The petitioner is now bound by the principle of waiver having responded to the show cause notice with a detailed and voluminous reply to the show cause, thus, after submission of reply, the petitioner cannot allege that the impugned notice was against the provisions incorporated in Section 148-A of the Income Tax Act. Though the petitioner has made an effort to refer to paragraph 10 of its reply while submitting that apart from merits, an objection with regard to time limit of seven days was also raised, however, while taking into consideration the elaborate reply on merit supported by the voluminous record, in our considered view, the petitioner has waived its rights to object the validity of the notice issued under Section 148-A of the Income Tax Act on the ground of having been afforded less than 7 days time to respond.
11. The contention of learned counsel for the petitioner is that since show cause notice issued under Section 148A(b) fell shot by the mandated minimum period of seven days, the entire exercise thereafter has vitiated is considered to be rejected at the very outset. Reason being that though the requirement of affording seven days clear notice to the assessee is couched in mandatory language but in a given case where despite show cause notice having been issued affording less than seven days for assessee to respond, the assessee yet responds to the same within the deficient period, in an elaborate manner without objecting to the very maintainable of such show cause notice, the assessee would be deemed to have waived his right to assail a notice solely on the ground of deficient notice period.
11.1 The scheme of Income Tax Act and the object behind its promulgation is to ensure maximum collection of tax by the State. Income Tax Act is more Revenue Centric than Assessee-Centric, thus, in case of any ambiguity or gray area while interpreting of any provision of Income Tax Act can be resolved by taking que from the object and intent behind enactment of Income Tax Act. As such in the present case, where a detailed reply on merit was submitted by the petitioner to the show cause notice which afforded six days instead of prescribed seven days to submit reply, the petitioner is estopped from raising any objection to the said show cause notice merely on the aforesaid ground.
12. We have also considered the order impugned dated 31/03/2022 (Annexure P/7). The authority upon taking into consideration the detailed reply of the petitioner, has taken a decision to issue notice under Section 148 of the Income Tax Act on the basis of material available on record including reply of the petitioner. Thus, this decision in our considered opinion cannot be gone into inasmuch as it is for the authority to act in accordance with Section 148-A of the Income Tax Act, at which stage. In our considered opinion, the authority is only required to form a prima facie opinion of any income having escaped assessment and thereafter proceed under Section 148 of the Income Tax Act. The concept of "free play in the joints" should be made available to the authority which is empowered to take a decision under Section 148-A of Income Tax Act. The decision under Section 148-A of the Income Tax perse does not fasten any kind of liability or penalty upon the assessee.
13. Reliance placed by the counsel for the petitioner in the case of H.H. Maharaja Martand Singh Ju Deo (Supra) is of no assistance to the petitioner inasmuch as in the said case, scope of Section 148-A of Income Tax Act was not an issue, thus, the decision in the case of H.H. Maharaja Martand Singh Ju Deo (Supra) has no applicability so far as the case in hand is concerned. Similarly the issue in the case of Income Tax Officer, Calcutta and Ors. (Supra) was to the effect that if a chargeable income to tax is escaped within the meaning of Section 147 of Income Tax Act, the requirement prior to reopening of assessment under Section 147 of Income Tax Act were considered. Again in the case of Income Tax Officer, Calcutta and Ors. (Supra) there was not the issue pertaining to Section 148A of Income Tax Act. Thus, this decision also has no applicability in the present case.
14. On the contrary, the decision which is taken under Section 148-A of the Income Tax is followed by a notice under Section 148 of the Income Tax Act where another opportunity of being heard is afforded. Thus, in our considered view, we do not find any illegality in the order impugned dated 31/03/2022 (Annexure P/7) as well as the notice impugned 31/03/2022 (Annexure P/8).
15. Resultantly, the Writ Petition stands dismissed.
(SHEEL NAGU) (MANINDER S. BHATTI)
JUDGE JUDGE
Astha
Digitally signed by ASTHA
SEN
Date: 2022.05.11 11:59:36
+05'30'