KOCHIN CO-OPERATIVE SOCIETY LTD., vs. THE INCOME TAX OFFICER,

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WP(C)/14761/2023HC KeralaKLHC01032021202321 December 2023Author: HONOURABLE MR. JUSTICE D. K. SINGH6 pages
AI SummaryRemanded

What did the High Court hold?

The High Court of Kerala held that there were no grounds to entertain the writ petition at this stage. The Court noted that the petitioner had failed to file a reply to the notice issued under Section 148 of the Act and had not filed its income tax return for Assessment Year 2016-17. The Court observed that the petitioner's claims regarding exemption under Section 80P and the inconsistencies in financial transaction details were matters to be addressed by filing a proper reply and return before the assessing authority. The Court permitted the petitioner to file a reply to the Section 148 notice and the income tax return within twenty-one days. If the petitioner complied, the assessing authority was directed to consider the submissions and provide an opportunity of hearing before passing a final order. The Court explicitly stated that no further opportunity would be granted for filing the reply or return. The writ petition was disposed of with these directions.

What were the facts?

The petitioner, Cochin Co-operative Society Ltd., engaged in credit services, marketing, and medical shops, failed to file its income tax return for Assessment Year 2016-17. The Income Tax Officer (ITO) noticed transactions totaling Rs. 95,30,000/- and issued a notice on January 3, 2023, under Section 148A of the Income Tax Act, 1961, seeking clarification for non-filing and potential escaped assessment. The petitioner replied, claiming exemption under Section 80P. Subsequently, a notice under Section 148A(b) was issued, recording satisfaction that income had escaped assessment. The petitioner did not file a reply to this notice. Consequently, an order under Section 148A(d) was passed on February 24, 2023, permitting the issuance of a notice under Section 148. The petitioner then filed a writ petition before the High Court of Kerala instead of responding to the Section 148 notice.

What were the issues?

1. Whether the High Court should entertain a writ petition challenging the initiation of reassessment proceedings under Section 148A and the subsequent notice under Section 148 when the petitioner has not availed the statutory remedy of filing a reply and return. Assessee's Contention: The petitioner, a co-operative society, contended that its income was exempt under Section 80P of the Act, implying no income had escaped assessment. They also highlighted issues with the consistency of the respondent's findings regarding property purchase and consideration payments. Revenue's Contention: The revenue, through the ITO, argued that the petitioner failed to provide necessary documentation and explanations for significant financial transactions and cash deposits, as flagged by the INSIGHT Risk Management System (INSIGHT RMS). The revenue asserted that these unexplained transactions indicated income chargeable to tax had escaped assessment, justifying the reassessment proceedings under Section 147 and 148A of the Act.

Which sections of the Income-tax Act were involved?

Section 139(1),Section 148A,Section 147,Section 148,Section 80P

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR. JUSTICE DINESH KUMAR SINGH THURSDAY, THE 21ST DAY OF DECEMBER 2023 / 30TH AGRAHAYANA, 1945 WP(C) NO. 14761 OF 2023 PETITIONER: KOCHIN CO-OPERATIVE SOCIETY LTD., NO. E 100, LALAN ROAD, MATTANCHERY, COCHIN, REPRESENTED BY ITS SECRETARY,PIN - 682002. BY ADV. SRI. C. A. JOJO RESPONDENTS: 1 THE INCOME TAX OFFICER, WARD 2(4) & TPS KOCHI, C. R. BUILDING, I. S. PRESS ROAD, COCHIN, PIN - 682018. 2 THE PRINCIPAL CHIEF COMMISSIONER, C R BUILDING, I S PRESS ROAD, COCHIN, PIN - 682018. BY ADV. SRI. CHRISTOPHER ABRAHAM - SC- INCOME TAX DEPARTMENT THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 21.12.2023, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C) NO. 14761 OF 2023 2 DINESH KUMAR SINGH, J. -------------------------- W.P.(C) No.14761 of 2023 ------------------------- Dated this the 21st day of December, 2023

JUDGMENT

1.

The petitioner is a Co-operative Society and is stated to be in business of providing credit services, marketing of consumer products and Neethi Medical shops towards members.

2.

The petitioner did not file return of its income under Section 139 (1) of the Income Tax Act, 1961 (hereinafter referred to as “the Act” for short) for the assessment year 2016-17. During the scrutiny, it was noticed that the petitioner had transactions around 95,30,000/- in the assessment year 2016-17. The petitioner was issued notice in Exhibit P-1 on 03.01.2023 asking the petitioner to clarify the transactions for an amount of Rs. 95,30,000/- and provide reasons for not filing the return despite huge financial transactions which would suggest filing of return mandatorily. Petitioner was put to caution that in the absence of any reply to the said show cause notice, the case of the petitoner would be taken up under Section 148A of the Act. Petitioner filed reply to the said notice stating that the petitioner had not filed return because the petitioner’s income is exempted under Section 80P

WP(C) NO. 14761 OF 2023 3 of the Act. Considering the said reply, notice under Clause (b) of Section 148A of the Act was issued to the petitioner, having recorded the satisfaction that the income chargeable to tax for the assessment year 2016-17 of the petitioner had escaped assessment within the meaning of Section 147 of the Act. The petitioner was required to show cause as to why in view of the details in enclosures of the notice, a notice under Section 148 of the Act should not be issued. Despite the service of the notice, the petitioner did not file his reply to the said notice under Section 148 of the Act.

3.

As no reply came forward, an order under Clause (d) of Section 148A of the Act in Exhibit P-4 dated 24.02.2023 came to be passed.

4.

The petitioner’s reply filed in response to Exhibit P-1 notice dated 03.01.2023 was taken into consideration. It was noticed that the assessee did not submit any document/evidence in support of their claim. The statement made in the reply to the Exhibit P-1 notice dated 03.01.2023 that the petitioner had purchased a property for Rs. 45,30,000/- and made payment of consideration of Rs. 50,00,000/- was having infirmity and inconsistency within. It was also stated that the assessee being a Co-operative Society, the assessee’s accounts were to be audited by the Audit Department of State Co-operative

WP(C) NO. 14761 OF 2023 4 Department and audited accounts to be passed in their annual general meeting. The petitioner was not having the audited accounts in their possession and they failed to furnish any information even after notice was issued under Section 148A(b) of the Act. It was also noticed that the assessee did not submit any explanation for the cash transactions reported and marked by the INSIGHT Risk Management System (INSIGHT RMS) of the Income Tax Department, the source of cash deposit/financial transactions with reference to the information available within the INSIGHT RMS remained unexplained and, therefore, it was concluded that the information tagged in the insight data suggested that income chargeable to tax had escaped assessment for the assessment year 2016-17, and it was fit case to issue a notice under Section 148 of the Act. The petitioner instead of filing the reply to the notice issued under Section 148 of the Act has approached this Court in this writ petition.

5.

Considering the aforesaid facts, this Court finds no ground to entertain this writ petition. The petitioner is permitted to file reply to the notice issued under Section 148 of the Act dated 10.03.2023 within a period of twenty one days from today, and also file return of its income for the assessment year 2016-17. If the petitioner fails to file

WP(C) NO. 14761 OF 2023 5 reply and return in response to the notice under Section 148 of the Act dated 10.03.2023 in Exhibit P-6, the assessing authority should proceed to finalise the proceedings expeditiously. If the petitioner files the reply and return in response to the said notice, the same shall be considered and the petitioner should be given an opportunity of hearing before the final order is passed. It is made clear that no further opportunity shall be granted to the petitioner to file reply to the notice under Section 148 of the Act or to file the return of its income for the assessment year 2016-17. With the above directions, the present writ petition is hereby disposed of. DINESH KUMAR SINGH JUDGE Svn

WP(C) NO. 14761 OF 2023 6

Appendix — schedule of exhibits
APPENDIX OF WP(C) 14761/2023 PETITIONER'S EXHIBITS EXHIBIT P1 TRUE COPY OF THE LETTER DATED 03.01.2023 ISSUED BY THE 1ST RESPONDENT EXHIBIT P2 A TRUE COPY OF THE REPLY SUBMITTED TO THE 1ST RESPONDENT DATED 12.01.2023 EXHIBIT P3 A TRUE COPY OF THE NOTICE ISSUED BY THE 1ST RESPONDENT U/S 148A(B) DATED 13.01.2023 EXHIBIT P4 A TRUE COPY OF THE NOTICE ISSUED BY THE 1ST RESPONDENT U/S 148A(D) DATED 24.02.2023 EXHIBIT P5 A TRUE COPY OF THE AUDITED CERTIFICATE ISSUED BY THE JOINT REGISTRAR AUDIT SECTION DATED 11.09.2017 FOR AY 2016-17 EXHIBIT P6 A TRUE COPY OF THE NOTICE ISSUED BY THE 1ST RESPONDENT U/S 148 DATED 10.03.2023 EXHIBIT P7 A TRUE COPY OF THE STATUS QUO ORDER IN WP ( C) 24112 OF 2019 DATED 04.09.2019 EXHIBIT P8 A TRUE COPY OF THE STAY ORDER IN WP(C) 4368 OF 2023 DATED 12.04.2023 RESPONDENT'S EXHIBITS EXHIBIT R1(A) COPY OF THE JUDGMENT OF THE SUPREME COURT DATED 2ND SEPTEMBER ,2022 IN THE CASE OF ANSHUL JAIN V. PRINCIPAL COMMISSIONER OF INCOME TAX AND ANOTHER , [2022] 449 ITR 2 256 (SC) EXHIBIT R1(B) COPY OF THE JUDGMENT OF PUNJAB AND HARYANA HIGH COURT DATED 2ND JUNE ,2022 IN THE CASE OF ANSHUL JAIN V.PRINCIPAL COMMISSIONER OF INCOME TAX AND ANOTHER ,[2022} 449 ITR 251 (P AND H) EXHIBIT R1(C) COPY OF THE JUDGMENT OF THE KERALA HIGH COURT DATED 07.12.2022 IN WP(C) NO.37527 OF 2022 IN THE CASE OF M/S VISWABHARATHI MEDICALS V.INCOME TAX OFFICER

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