VISHAL GARG vs. ASSISTANT COMMISSIONER OF INCOME TAX AND OTHERS

Facts

The petitioner, Vishal Garg, is challenging notices issued under Section 133(6) and Section 148 of the Income Tax Act, 1961, for Assessment Year 2020-21. The petitioner is engaged in the business of selling medicines and earning commission from marketing activities and supply of electricity through various firms and proprietorships. Notices under Section 133(6) were issued on 16.12.2022, 26.12.2022, and 06.01.2023, seeking information. In response, the petitioner disclosed receiving sales commission of ₹14,58,004/- from UFO Moviez India Limited, which was offered for tax as part of business turnover and reflected in the Income Tax Return (ITR) filed on 04.01.2021. The ITR was processed under Section 143(1), and a refund was issued. Subsequently, a notice under Section 148 was issued on 31.03.2024, alleging escapement of income to the extent of ₹14,58,004/-.

Held

The High Court allowed the writ petition and quashed the impugned notices. The Court found that the petitioner had indeed disclosed the commission income of ₹14,58,004/- from UFO Moviez India Limited in its ITR for AY 2020-21, and this amount was offered for tax as part of the business turnover. The ITR was processed under Section 143(1), and a refund was issued, indicating that the Assessing Officer was satisfied at that stage. The Court noted that the reply to the notice under Section 133(6) had specifically addressed the query regarding contractual receipts and fees for professional and technical services, stating that the petitioner was only in the business of supply of electricity and sale of medicines, and had not earned professional or technical service fees, but had received sales commission from UFO Moviez India Ltd., which was offered for tax. The Court concluded that the notice under Section 148 was issued without application of mind and was therefore vitiated. Furthermore, the Court referenced a coordinate bench's decision in *Jasjit Singh vs. Union of India* (CWP No.21509 of 2023), which held that instructions and circulars cannot override statutory provisions and that authorities cannot usurp legal provisions for their convenience. The Court found that the notices were issued without jurisdiction, particularly in light of the faceless assessment procedures under Section 144B.

Key Issues

1. Whether the notice under Section 148 of the Income Tax Act, 1961, for Assessment Year 2020-21, was issued erroneously, assuming that the petitioner had received a commission of ₹14,58,004/- and failed to disclose it or offer it for tax, when the same was already disclosed in the ITR as part of business turnover? Assessee's Contention: The petitioner argues that the notice under Section 148 was issued without proper application of mind, as the commission income of ₹14,58,004/- was already disclosed in the ITR and processed under Section 143(1). The petitioner relies on the Supreme Court judgment in *ITO vs. Lakhmani Mewal Das* (103 ITR 437) to assert that the formation of belief for issuing a notice must have a rational connection and live link with the material on record. The petitioner contends that the reply to the notice under Section 133(6) was exhaustive and correctly reflected the income in the ITR, making the Section 148 notice unjustified. Revenue's Contention: The revenue contends that despite providing exhaustive replies, the petitioner failed to provide specific details regarding the commission income and that the notice under Section 148 was issued correctly based on the assumption that this income was not disclosed. The revenue also points to a verification report stating that the assessee had not filed any reply regarding the commission of ₹14,58,004/-.