R.K. BUILDCREATIONS PRIVATE LIMITED vs. THE INCOME TAX OFFICER

Facts

The petitioner, R.k. Buildcreations Private Limited, filed a writ petition challenging an order dated 26.07.2022 passed under Section 148A(d) of the Income Tax Act, 1961, and a notice dated 30.06.2021 issued under Section 148. For Assessment Year 2015-16, the petitioner had declared NIL income. A notice under Section 148 was issued on 30.06.2021, followed by a notice under Section 148A(b) on 30.05.2022 after the Supreme Court's decision in Ashish Agarwal. The petitioner responded, demanding details and filing objections. Information was supplied on 27.06.2022, and objections were rejected on 26.07.2022. Subsequently, an order under Section 147 read with Section 144(B) was passed on 25.05.2023. The petitioner filed an appeal but later withdrew it, stating the writ petition was still pending.

Held

The Tribunal held that the impugned order passed under Section 148A(d) was unsustainable and not in consonance with the procedure prescribed under Section 148A of the Act. The Court found that the Assessing Officer (AO) was mandated to pass a speaking order, taking into consideration not only the material on record but also the reply filed by the assessee. The judgment noted that the AO reproduced the petitioner's reply dated 11.06.2022 and concluded that the petitioner had not made arguments on merits, thus having nothing to explain regarding the cash loan and interest received. However, the additional reply dated 14.06.2022 was not considered, and consequently, the objections raised therein were not dealt with. This failure to consider the assessee's objections and pass a speaking order that addresses all points raised rendered the impugned order procedurally flawed. The Court also addressed the contention of alternative remedy, stating that the issue went to the root of the jurisdiction for initiating reassessment proceedings, falling within exceptions to the rule of alternative remedy, specifically violation of principles of natural justice and proceedings without jurisdiction. Therefore, the impugned order dated 26.07.2022 was quashed, and the matter was remitted back to the respondent to proceed with a notice under Section 148-A(b) in accordance with the law.

Key Issues

1. Whether the reassessment proceedings initiated against the petitioner for AY 2015-16 are time-barred, considering they were initiated beyond three years from the end of the relevant assessment year? 2. Whether the order passed under Section 148A(d) is sustainable when the adverse material was allegedly not provided with the notice, and the information relied upon does not relate to the petitioner? 3. Whether the notice issued is in accordance with Section 151A and the scheme framed thereunder, and if the objections raised by the petitioner were specifically dealt with in the impugned order? Assessee's Arguments: The petitioner argued that the reassessment proceedings are time-barred as they were initiated beyond three years. They contended that the adverse material was not provided with the notice, and the information relied upon did not pertain to them. The notice was also argued to be non-compliant with Section 151A and the related scheme. Furthermore, the petitioner claimed their objections were not specifically addressed. Revenue's Arguments: The respondent argued that the petitioner has an alternative remedy by way of appeal and that the petition should be dismissed. They relied on Division Bench judgments of the Rajasthan High Court. The respondent defended the impugned order by stating that income of Rs. 2,80,00,000/- had escaped assessment and proceedings were within limitation. They also claimed the petitioner was provided information, including Annexure 'A-1', that Section 151A does not apply at the initiation stage, and that materials relating to the petitioner were seized during a survey of M/S Om Sokhal Builders and Construction Private Limited. Finally, they asserted that the petitioner's objections were considered and could be raised in appeal.