M/s.Crescent EPC Projects and Technical Services Limited., vs. The Deputy Commissioner of Income Tax,

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WP/12246/2023HC TelanganaHBHC01022488202328 April 2023Bench: N.TUKARAMJI,UJJAL BHUYAN7 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the order passed by the respondent No. 1 under Section 148A(d) of the Income Tax Act, 1961, dated April 10, 2023, was not sustainable. The Court observed that while passing the order, the AO did not record the substance of the reply submitted by the petitioner and, more importantly, noted that further verification would be required. This indicated that the AO had not reached a conclusive view that it was a fit case for issuing a notice under Section 148. The Court found that the objections raised by the petitioner were dealt with in a mechanical manner. Consequently, the impugned order dated April 10, 2023, was set aside, and the matter was remanded back to the AO to pass a fresh order in accordance with law after providing an opportunity for a personal hearing to the petitioner. The consequential notice dated April 10, 2023, was rendered of no legal consequence. The Court explicitly stated that no opinion on merits was expressed, and all contentions were kept open.

What were the facts?

The petitioner, M/s. Crescent EPC Projects and Technical Services Limited, an assessee company, filed a writ petition challenging a notice under Section 148A(d) of the Income Tax Act, 1961, dated April 10, 2023, and a consequential notice under Section 148 of the Act, also dated April 10, 2023, issued by the Deputy Commissioner of Income Tax, Circle 1(1), Hyderabad, for Assessment Year 2019-20. The petitioner had received a notice under Section 148A(b) on March 25, 2023, alleging escapement of income, and had submitted a reply on April 3, 2023. The Assessing Officer (AO) found the reply unacceptable for reasons related to redeemable preference shares and payments to M/s. Vibrant Engineering and Constructions Private Limited, stating further verification was required.

What were the issues?

1. Whether the order passed under Section 148A(d) of the Income Tax Act, 1961, dated April 10, 2023, is legally valid and not arbitrary, given that the AO noted further verification was required? Assessee's Contention: The petitioner argued that the AO mechanically dealt with their objections and passed the order under Section 148A(d) without proper consideration, especially since the AO himself acknowledged the need for further verification. This, they contended, violated principles of natural justice and Article 14 of the Constitution of India. Revenue's Contention: The judgment does not record specific arguments made by the revenue. However, the AO's order under Section 148A(d) implies a belief that the case was fit for issuing a notice under Section 148.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148

AI-generated summary — verify with the full judgment below

[ 3311 ] HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE TWENTY EIGHTH DAY OF APRIL TWO THOUSAND AND TWENTY THREE PRESENT THE HONOURABLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HONOURABLE SRI JUSTICE N.TUKARAMJI WRIT PETITION NO: 12246 OF 2023 Between: AND 1 2 M/s.Crescent EPC Projects and Technical Services Limited., Having its office at156-'159, Paigah House, Sardar Patel Road, Paradise, Secunderabad - 500003, represented by its Director, Sri Krishnam Raju Penmetsa, S/o. Satyanarayana Raju Penmetsa, aged about 84 Years, R/o. Hyderabad. ...PETITIONER The Deputy Commissioner of lncome Tax, Circle 1(1), Hyderabad. The National Faceless Assessment Center, lncome.tax Department, New Delhi, lndia. ...RESPONDENTS Petition under Arlicle 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a writ, order or direction more particularly in the nature of a writ of mandamus declaring the lmpugned Notice under Section 148 of the Act in DIN and Notice No. ITBA/AST/s I 1 48 1 I 2023-2411 05 1 98s847( 1 )dated 1 Al o 4 I 2023 and the Order passed under section 148A(d) of the Act bearing DIN and Notice No.lTBA/AST/F1148N2023-241105988682(1), dated 10-04-2023issued by the Respondent No. 1 for Assessment Year 2O19-2O in PAN. AAACU9200F and all proceedings in furtherance there of as being void, illegal, arbitrary, violative of Article 14 of the Constitution of lndia, without any authority of law and violative of principles of natural justice

lA NO: 1 OF 2023 Petition under Section .l 51 CPC praying that in the circumstances .stated in the affrdavit filed in suppo( of the petition, the High Court may be pleased to stay the operation of the Notice under Section 148 of the Act in DIN and Notice No. ITBAJAST/s1148 112023-2411051988847( 1 )dated '10-04-2023 and the Order passed under section 148A(d) of the Act bearing DIN and Notice No.ITBtuAST/F 1148N2023-2411 05988682( 1 ), dated 10-04-2023issued by the Respondent No. 1 for Assessment Yeat 2019-20 in PAN. AAACU9200F and all proceedings rn furtherance thereof Counsel for the Petitioner: SRI NAGA DEEPAK FOR SRl. R.S. ASSOCIATES Counsel for the Respondents: SRI B.SAPNA REDDY SC FOR INCOME TA)( The Court made the following: ORDER

THE HON'BLE THE CHIEF IUSTICE UIIAI BHTryAN AND THE HON'BLE SRI IUSTICE N.TI] II W.P.No.l2246 of 2023 QRDEB, //tr /rc 1 lon'lth rhe (,hrc1 lrcth (t1jat Bhryaa) Heard Mr. Naga Deepak, lcarned counsel for the petitioner and NIs. B.Sapna Reddv, lcarned counsel For the rcspondents. 2. Ry fihng this pctition under Arucle 226 of the Constiruoon o[ India, pcutioner has assalled legaliry and validiry o[ the ordcr dated '10.04.2023 passed by respondent No.1 under Secuon 1484(d) o[ the Income Tax Act, 1961 (briefly 'the Act' hereina[ter) for thc assessment year 2019 -2020 as weli as rhc consequendai notrce dated 10.04.2023 issued by respondent Noll under Section 148 of the Act for the said assessment year 3. Petitioner before us is an assessee under the Act. Ir is a company regisrcre d under rhe Companies Act, 1956 engage d in thc business of civil construction. 4 Notrce dated 25.03.2023 was issued by rcspondenr No.1 to thc petirioner undcr Section 148A(b) of the Act staring that he had -.- in[ormation suepesting that income of the petitioner chargeablc to tax l

) \--E \'4 for the asscssrnent Vear 2019 2O2O ltas escapcd assessllent ruthin thc meaning of Scction 1,41 of thc .'\ct, thc dctails oI whicl.r wcrc mcnuoncd in thc anllcxure aPP tncome ended to rhe alorcsaid noticc Peridoner was called uPOn to shorv causc as to why a noticc under Section 148 of thc Act should not bc issued. 5. It appears that pctitioner had submitted a detailed rePly to the rcspondenr ott 03.04.2023 tarsing objcction as to the escapement of 6. Howcver, resp<;ndent No.1 passed the impugned order ot 10.04.2023 under clausc (d) of Sccuon 148A of the Act hotding that present is a fit casc for issuancc o[ notice under Section 148 of the act] 1. \X/hile passing tl.re impugned order dated 10.04.2023, we find that respondent No.1 did not evcn recotd thc substance of the reply submitted by the petiuoner, though he noted that petitioner submitted reply on 03.04.2023 which was hcld to be not acceptable [or the followrng reasons: The teply filcd by thc asscssee comPany has duly been considered and. found not acceptable for thc following tcasons:

3 7 1. Thc assessce's rcpl1, stating that rhe company held Rs.10,10,00,000/- redeemablc non-cumuiarive preference shares rssucd by ll{/s.Cvgnus Real Estate Irvt. Ltd. during the try.20i5_16 and further, same were rcdeemable by Cygnus of ,rm" value during rhe Ir.Y.201B-19 has no material evidences. It is pertinent tJ mention tirat in thc assessee case similar notice u/s.14g has been issued lrrr the l.'.Y.2015-16 tclevanr to A.y.2016_17. Hcnce, this issue needs venfication to cstablish the lact for the A.y.201 6_17 and. 2019-20. Hcncc, rhe reply submrtted is not acccptable. 2 'I'hc assessee's replv witl-r regards to paymenr made to N{/s. \'brant is not propcrly examined. It has been simp\, menuoned as 'form of loan out of commercial expediency. fl. as-scssec company failed to explain the reasons for such huge amount of loan extended to N{/s. \,brant Ilngineering and Conitructions Private Lrmited. Hence, the reply submitted is not acceptable. Thereaftcr, re spondent No.1 observed that submission of the \ assessec would rcquirc further verification. 8. I[ that be so, no conclusion could have been reached by respondent No.1 that prescnt is a fit case for issuance of notice under Section 148 of the Act for rhe assessmenr year 201,9_20 since respondeflt No.1 himself was of the view that further considerarion wouid be required to take a view one way or the other as to issuance of notice under Secrion 148 of the Act o That apart, we find that objecrion raised by the pedtioner rvas dealt with by respondent No.1 in a very mechanical manner. ,,/ \ t I

4 dated 10.04.2023 passed bJ' resPondcnt No 1 and remand thc matter back to the [rle oF respondent No.1 to pass a fresh order in accordance with law after giving an opportunin, of personal hearing to thc pe[t1onef. 10. 'fhat being thc posirion, wc set asrdc the impugned ordcr 11. Since we have set aside the impugned order dated 10.04.2023, consequcnual nouce datcd i0.04.2023 would be of no legal consequence. 12. \fle make it clear that we ha','e not exprcssed any opinion on merit and all contentions are kept open '13. Writ Peridon is accordingly allowed. No costs. As a sequel, miscellaneous petrdons, pending if any, stand closed SDI. K. AMMAJI assrsrAtuffflgRAR . SEC"T-ION OFFICER /ITRUE COPY// "' i +l: R:fl N"",Pf*[lBjl"l3:3jJ[Hi3 J'i['3' I3'3''ili]xJxB"1i#"' *"* lffi iEg$"tfl !,s^$-'iREs""3i'strift t"J#3+AXtoPUcl KKS SB q I I

HIGH COURT DATED:2810412023 ORDER WP.No.12246 of 2023 ALLOWING OF THE WP WITHOUT COSTS 5{ATE q I\*{l\t ) \1 -.--_ i;- . qoL w' e"o

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