AGARWAL POLYSACKS LIMITED vs. PRINCIPAL COMMISSIONER OF INCOME TAX-I

Facts

Agarwal Polysacks Limited (the petitioner) filed a writ petition challenging an order dated April 5, 2024, and a notice dated March 28, 2024, issued by the Income Tax Department. The notice under Section 148A of the Income Tax Act, 1961, indicated that income chargeable to tax for assessment year 2020-21 had escaped assessment. An inquiry report suggested that the petitioner sold 13 plots during the financial year 2019-20 (assessment year 2020-21) for a total consideration of Rs. 57,60,112/- which was allegedly received in cash. The petitioner was provided with the inquiry report and an opportunity to explain, but the Revenue contended that no satisfactory explanation was furnished.

Held

The High Court held that the requirement of natural justice under Section 148A(b) does not necessarily imply a personal hearing, and an opportunity to be heard via a show cause notice and reply suffices. The Court found that the petitioner's reply dated April 3, 2024, was indeed considered, as evidenced by the order dated April 5, 2024, which analyzed the petitioner's submissions regarding the power of attorney holder and the civil suit. The Court further held that an agent acting under a power of attorney binds the principal, and any act done by the agent is as effective as if done by the principal. The petitioner's claim of not being aware of the sales or that the power of attorney holder acted fraudulently does not absolve it of tax liability. The dispute between the petitioner and the power of attorney holder is a private law matter and not a ground to challenge the reassessment proceedings under Article 226 of the Constitution. Therefore, the writ petition was dismissed. The Court did not expressly leave any issue undecided.

Key Issues

1. Whether the petitioner-company was afforded an adequate opportunity of being heard as required by Section 148A(b) of the Income Tax Act, 1961, and whether its reply was considered by the Assessing Officer? 2. Whether the sale of 13 plots by a power of attorney holder, allegedly without the petitioner's knowledge and in contravention of a civil court injunction, absolves the petitioner from tax liability on the sale consideration? Assessee's Arguments: - No opportunity of hearing was given to the petitioner. - The reply furnished by the petitioner was not considered. - Relied on: P.G.O. Processors Private Limited vs Commissioner, C. Ex.; Red Chilli International Sales vs. Income Tax Officer & Anr.; Chotanagpur Diocesson Trust Asson. Vs. Union of India. Revenue's Arguments: - Section 148A(b) contemplates a limited inquiry, and the assessee gets an opportunity to defend during assessment proceedings. - No prejudice has been caused to the petitioner. - Relied on: M/s Chetak Enterprises Ltd. Vs. The Assistant Commissioner of Income Tax. - The petitioner's defense regarding the power of attorney holder acting fraudulently is not a valid ground to avoid tax liability.