SHRI BALAJI IRON AND STEEL TRADERS vs. ASSISTANT COMMISSIONER OF INCOME-TAX
What did the High Court hold?
The High Court dismissed the writ petition. It observed that Section 148A requires the AO to conduct an inquiry and provide an opportunity of being heard before issuing a notice under Section 148. The limitation for issuing such notice is governed by Section 149. In this case, the AO found bogus purchases amounting to Rs. 89,86,164/- for AY 2016-17, supported by witness statements admitting to issuing bogus bills. The Court distinguished the present case from Somnath Dealtrade Private Limited, noting that proceedings were initiated based on specific information and witness statements. It also differentiated from Fena Pvt. Ltd. by observing that the AO had considered the petitioner's participation and witness statements before passing the order. Citing Gian Castings Private Limited and Anshul Jain, the Court held that writ courts should not interfere at a premature stage when proceedings are ongoing and there is no jurisdictional error. The Court also referred to its own Division Bench decision in Barbrik Projects Ltd. Vs. Union of India, which held that bogus purchases can form the basis for issuing a notice under Section 148 and dismissed the assessee's writ petition. The Court concluded that the petitioner had sufficient opportunity to present its case and take all available defenses, and therefore, no interference was warranted with the order under Section 148A(d) and the notice under Section 148.
What were the facts?
The petitioner, Shri Balaji Iron and Steel Traders, a partnership firm, filed its income tax return for Assessment Year (AY) 2016-17 on September 28, 2017, declaring a total income of Rs. 4,10,390. On March 25, 2023, it received a notice under Section 148A(b) of the Income Tax Act, 1961 (IT Act), alleging income chargeable to tax had escaped assessment for AY 2016-17. The petitioner replied on April 5, 2023, stating the notice was uncalled for. The Assessing Officer (AO) passed an order under Section 148A(d) on April 10, 2023, deeming the case fit for issuing a notice under Section 148 of the IT Act, which was also issued on the same date. The petitioner challenged these orders and notices via a writ petition.
What were the issues?
1. Whether the order passed under Section 148A(d) and the notice issued under Section 148 of the IT Act for AY 2016-17 are illegal, arbitrary, and without jurisdiction, as no information or material was placed to suggest income had escaped assessment, and the proviso to Section 148 was not complied with? 2. Whether the petitioner's reply was not considered, violating principles of natural justice? 3. Whether the notice was barred by limitation, given that the purchase of Rs. 89,86,164/- was sold and the income from sale and purchase was less than Rs. 50 lacs? Assessee's Contentions: The petitioner argued that the AO's order and notice were illegal, arbitrary, and without jurisdiction due to lack of information suggesting escaped income and non-compliance with the proviso to Section 148. It contended that its reply was ignored, violating natural justice. The petitioner also claimed the notice was time-barred as the income from the transactions was below Rs. 50 lacs. Reliance was placed on Fena Pvt. Ltd. Vs. ACIT, Swastik Wire Products Vs. Principal Commissioner of Income Tax, and Somnath Dealtrade Private Limited Vs. Union of India. Revenue's Contentions: The revenue submitted that it received information indicating escaped income for AY 2016-17. Investigations revealed bogus purchases of Rs. 89,86,164/- from M/s Rajendra Ispat during FY 2015-16. Statements recorded during survey operations under Section 133A from individuals associated with M/s Pratyush Steels, M/s Abhishek Enterprises, and M/s Rajendra Ispat admitted to issuing bogus bills for sales after receiving payments through banking channels. The revenue argued that the AO's consideration at the Section 148A(d) stage is limited to ascertaining escaped income, and the notice was issued as per the statutory scheme. Reliance was placed on Gian Castings Private Limited Vs. CBDT and Anshul Jain Vs. Principal Commissioner of Income Tax.
Which sections of the Income-tax Act were involved?
Section 148A,Section 148,Section 147,Section 149,Section 133A
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
well-reasoned order. 9) In the matter of Somnath Dealtrade Private Limited (supra), the High Court of Calcutta observed that the reply filed by the assessee was not taken into consideration and therefore, the order passed under Section 148A (d) of the IT Act and notice issued under Section 148 of the IT Act were set aside. The relevant paras – 10, 13 & 15 are reproduced herein below:- “10. Admittedly, the assessee had submitted the reply along with documents much prior to the said date, i.e. on 9th April, 2022 as noted above. The assessing officer has thereafter proceeded to pass the order under Section 148A (d) of the Act. The assessee, being aggrieved by such order, had filed the present writ petition. The order was challenged on the ground of gross procedural irregularity, violation of principles of natural justice, non-
-8- consideration of the request made in the reply dated 9th April, 2022, non-consideration of the documents appended along with the said reply dated 9th April, 2022 and non-compliance of the request to provide the complete information about the insight portal report based on which the notice under Section 148A (b) of the Act was issued.
On going through the order dated 13th April, 2022 impugned in the writ petition, we find that none of these aspects have been adhered to by the assessing officer. The assessing officer no doubt has referred to the assessee's reply dated 9th April, 2022 but there is no discussion as to the objection raised by the assessee in their reply. There is no discussion on the documents, which were placed by the assessee along with the reply with soft copies uploaded in the e-proceeding. Though the assessing officer states that “in the light of the discussion and material available on record he was of the opinion that income chargeable to tax has escaped assessment”, there is no discussion on any of the materials, which were placed by the assessee along with the reply dated 9th April, 2022. Thus, it can be safely held that the order dated 13th April, 2022 passed under Section 148A (d) of the Act is not sustainable and liable to be set aside.
The learned Advocate referred to a decision of the Hon'ble Supreme Court in Bishal Ashwin Patel – Vs. - Assistant Commissioner of Income Tax Circle 25 (3) and Ors. reported in 2022 SC OnLine SC 366 for the proposition that an order has to be a reasoned order. There can be no quarrel over such proposition and the assessing officer having issued a show cause notice and invited a reply from the assessee was bound to assign reasons as to how in his opinion the reply is not satisfactory. This is conspicuously absent in the order dated 13th April, 2022. Reference was also made to the decision of the High Court of Delhi in the Case of Divya Capital One Private Limited – Vs. -Assistant Commissioner of Income Tax Circle 7 (1) Delhi & Anr. passed in WP(C) 7406 of 2022 dated 12th May, 2022. In fact, this decision was referred to and replied upon by this Court in the Case of M/s. R.N. Fashion Vs. Union of India and Ors passed in APOT 85 of 2022 dated 20th May, 2022. The relevant paragraphs of the judgment is as follows :- “ The opportunity provided under Clause (b) of Income Tax, Circle-7 (1), Delhi and Anr. in WP(C)7406/2022 dated 12th May, 2022. We find that the facts in the said case are identical to that of the case before us. The Hon'ble Division Bench had taken note of the new re-assessment scheme introduced by the Finance Act, 2021 and pointed out
-9- that the safeguards were brought in the amended re-assessment scheme in accordance with the judgment of the Hon'ble Supreme Court in GKN “information” as contained in Explanation-1 to Section 148 cannot be lightly resorted so as to reopen assessment and this information cannot be a ground to give unbridled powers to the revenue. Further the Court took into consideration the order which was impugned therein and found the same to be cryptic. The next aspect which the Court considered was whether the petitioner therein was denied effective opportunity to file reply and it was held that the petitioner therein had a right to get adequate time in accordance with the provisions of the Act to submit its reply and the assessing officer in the said case had passed an order under Section 148A (d) of the Act in great haste and in gross violation of the principles of natural justice as the assessee therein was not given reasonable time to file reply. Further the Court noted that Section 148A (b) permits the assessing officer to suo motu provide upto 30 days period to an assessee to respond to a show cause notice issued under Section 148A (b) which period may, in fact, be further extended upon an application made by the assessee in this behalf and such period given to the assessee is excluded in computing the period of limitation for issuance under Section 148A of the Act in terms of the 3rd proviso under Section 149 of the Act. In this said case also, the assessee had file their reply by 31st March, 2022 and the same was available on record. However, the reply was not considered as per the mandate contained in Section 148A (c) thereby violating the duty cast upon the assessing officer. In paragraph 16 of the said decision the significance of issuance of show cause at a stage prior to issuance of reassessment notice under Section 148 of the Act has been pointed out in the following terms: “This Court is of the opinion that significance of issuance of a show cause notice at a stage prior to issuance of a reassessment notice under Section 148 of the Act has been lost on the Respondents. This Court takes judicial notice that in a majority of reassessment cases post 1st April, 2021, the orders under Section 148A (d) of the Act use a template/general reason to reject the defence of the assessee on merits, namely, “found devoid of any merit because the assessee company has failed to produce the relevant documents in respect of transactions mentioned in show cause notice . . . . it is established that the assessee has no proper explanation. . .” Consequently, this Court is -10- of the opinion that a progressive as well as futuristic scheme of re-assessment whose intent is laudatory has in its implementation not only been rendered nugatory but has also had an unintended opposite result.” The facts of the present case are distinguishable from the facts of the case of Somnath Dealtrade Private Limited (supra). In the case at hand, revenue initiated proceedings under Section 148A of the IT Act after getting specific information in its Insight portal uploaded by ACIT/Deputy Commissioner of Income Tax, Central Circle-2, Raipur. It is also evident from the documents that during the course of the survey operation under Section 133A of the IT Act conducted on 24.01.2019, the department recorded the statement of the witnesses namely Gitesh Agrawal, Abhishek Agrawal and Rajendra Chawhan. From a perusal of the documents, it appears that the petitioner has been afforded a proper opportunity of hearing. 10) In the matter of Fena Pvt. Ltd. (supra), the High Court of Delhi set aside the order and notice under Section 148 of the IT Act on the ground that the Assessing Officer had not taken into consideration the replies along with documents/evidence filed by the assessee. In the present case, the Assessing Officer has issued notice, the petitioner participated in the proceedings, the statement of the witnesses was recorded and thereafter the order was passed, therefore, the facts of the present case are different from the facts of the matter of Fena Pvt. Ltd. (supra) 11) Now coming to the judgments cited by learned counsel for the -11- respondents. In the matters of Gian Castings Private Limited (supra) and Anshul Jain (supra) the Punjab and Haryana High Court at Chandigarh while dealing with a similar issue held that where the proceedings have not even been concluded by the statutory authority, the writ Court should not interfere at such premature stage. It is further held that it is not a case where from a bare reading of notice it can be axiomatically held that the authority has clutched upon the jurisdiction not vested in it. The correctness of order under Section 148A (d) of the Income Tax Act is being challenged on the factual premise contending that jurisdiction though vested has been wrongly exercised. There is a vexed distinction between jurisdictional error and error of law/fact within the jurisdiction and for rectification or errors statutory remedy has been provided. The order passed by the High Court of Punjab and Haryana has been affirmed by the Hon’ble Supreme Court in SLP(C) No.10762 of 2022 order dated 17.06.2022 and SLP No.14823/2022 order dated 02.09.2022, dealing with a similar issue in para 31(12), 32 & 33 observed as under : “31(12). After considering the reply of the assesse and data available on the record, it is well settled that the assessee has made transactions of Rs.2,20,00,275/- during the FY 2017-18 in form of bogus purchase from the M/s. Panveer Trading Private Limited who are involved in providing of accommodation entries in form of bogus sale/purchase for commission. The assessee is the -12- beneficiary company in this case and the above transaction where no goods were transferred from the seller to purchaser. Only entries have been made in the books. By making accommodation entries the assessee has raised bogus expenditure in terms of bogus purchase. Thus, the amount of purchase made from the above parties of Rs. 2,20,00,275/- has escaped assessment during the AY 2018-19. The information suggests that the income chargeable to tax has escaped assessment by Rs. 2,20,00,275/-….”
There is, prima facie, some material on the basis of which the Department could reopen the case. The petitioner had not even made an attempt to assert that the material facts relied on in the SCN is erroneous.
In view of the above, we are of the opinion that no interference is called for with the order of the learned Single Judge. Accordingly, the writ petition is dismissed.” 13) At the same time, the respondents have cited certain judgments passed by various High Courts and some of them have been affirmed by the Hon’ble Supreme Court where it is categorically held that if there is no procedural fault, the Writ Court should not interfere at such premature stage when the proceeding initiated against the assessee is yet to be concluded by the statutory authority and in one of the decisions passed by the Division Bench of this Court it was held that the bogus purchases can be made the basis for issuance of notice under Section 148 of the Income Tax Act and the said writ petition preferred by the assessee was dismissed. 14) In view of the above, it is quite vivid that the notice was issued to the petitioner, reply was filed, the same was taken into consideration, statement of the witnesses was recorded and thereafter order was passed under Section 148A (d) of the IT Act and the notice was issued under Section 148 of the IT Act; the matter is still pending before the authority and the petitioner has sufficient opportunity to take all defences available to him. In that -13- view of the matter, I do not find any good ground to interfere with the order passed by the authorities under Section 148A (d) of IT Act and notice issued under Section 148 of the IT Act. Consequently, the present petition fails and is hereby dismissed. (Rakesh Mohan Pandey) Judge vatti
More judgments on Section 148A
- Rajesh Kumar Khandelwal, Jaipur vs ITO Ward 5(1), JaipurITA 21/JPR/2026[2016-17]Status: Disposed21 Oct 2026AY 2016-17
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- Nitinbhai Nanalal Badani, Rajkot vs CIT (Appeals), National Faceless Appeal…ITA 658/RJT/2025[2020-21]Status: Disposed19 Oct 2026AY 2020-21
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