Sri Tulasi Rao Naineni vs. The Income Tax Officer

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WP/28880/2022HC TelanganaHBHC01041153202228 July 2022Bench: SUREPALLI NANDA,UJJAL BHUYAN8 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the orders passed under Section 148A(d) were not at an interlocutory stage but at a stage prior to the issuance of notice under Section 148. The conclusions reached by the respondent were solely for the purpose of determining if a case for reopening and issuing notice under Section 148 was fit, and these were not conclusive findings. Therefore, the Court was not inclined to interfere with the proceedings midway. The petitioner was advised that they would have all rights and opportunities to defend themselves in the proceedings under Section 147 and, if still aggrieved thereafter, could pursue the hierarchy of appellate remedies. Consequently, the Court declined to invoke its writ jurisdiction under Article 226 of the Constitution of India.

What were the facts?

The petitioner, Sri Tulasi Rao Naineni, an individual and HUF assessee, challenged orders dated 30.06.2022 passed under Section 148A(d) of the Income Tax Act, 1961, and notices dated 30.06.2022 issued under Section 148 of the Act for assessment years 2013-14 and 2014-15. For AY 2014-15, the petitioner, as an individual, had not filed an income tax return. The respondent Income Tax Officer initiated proceedings based on an earlier notice under Section 148, which was construed as under Section 148A following the Supreme Court's decision in Union of India vs. Ashish Agarwal. The petitioner explained the source of investment in NSN Enclave as advances from M/s. Bhavya's Construction Private Limited and family savings disclosed in the HUF return for AY 2012-13. The respondent rejected this explanation, citing a lack of verifiable evidence and the detection of undisclosed capital gains in the HUF assessment for AY 2012-13.

What were the issues?

1. Whether the High Court should interfere with the proceedings under Section 148A(d) and Section 148 of the Income Tax Act, 1961, at this stage, when the impugned orders and notices are preliminary in nature and do not constitute conclusive findings. (Question of law and fact) Assessee's Contention: The petitioner sought to set aside the order and notice as illegal, arbitrary, and unsustainable, arguing they were against the spirit of Section 148A. The petitioner contended that since there was no taxable income for AY 2014-15, no return was filed. Revenue's Contention: The respondent, through its Standing Counsel, argued that the petitioner had failed to furnish verifiable evidence for the source of investment and that the HUF return for AY 2012-13 did not support the claim for AY 2014-15. The respondent concluded that the transaction value was income chargeable to tax for AY 2014-15, justifying the initiation of proceedings under Section 147.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148,Section 147

AI-generated summary — verify with the full judgment below

HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) THURSDAY, THE TWENTY EIGHTH DAY OF JULY TWO THOUSAND AND TWENTY TWO PRESENT THE HONOURABLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HONOURABLE MRS JUSTICE SUREPALLI NANDA WRIT PETITION NOS: 28880 AND 28893 OF 2022 ...PETITIONER AND The lncome Tax Officer, Ward -11(1), Signature Towers, Opp. Botanical Gardens, Kondapur, Hyderabad 500084. .RESPONDENT Petition Under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to pass an order or direction especially one in the nature of WRIT OF MANDAMUS holding that the order dated 30.06.2022 passed under section 148A(d) of the Act with DIN and Order No. ITBA/COM/F/1712022- 2311043686811(1), for Assessment Yeat 2O14-15, and the notice dated 30.06.2022 issued under section 148 of the Act with DIN and Document No.ITBA/AST/M|148 112022- 2311943691934(1) for assessment year 2014-15 as being illegal, arbitrary and unsustainable on facts and in law being against the spirit of the provisions of section 148A of the Act and consequgntly set aside the same. |.A.NO:1 OF 2022 Petition Under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to stay all further proceedings pursuant to issuance of notice dated 30.06.2022 under section 148 of the Act with DIN and Document No.ITBA/AST/M/148 112022-2311043691934( 1 ) for assessment year 2014-15. Counsel for the Petitioner : SRI.K.VASANT KUMAR Counsel for the Respondents : Ms.K.MAMATA CHOUDARY (SC) I W.P.No.28880 of 2022 Between: Sri Tulasi Rao Naineni, S/o. Sri (Late) N. Narayana Rao, H.No.716, Vivekanandanagar Colony, Kukatpally, Hyderabad 500072. I

W-P.NO: 28893 OF 2022 Between: Sd Tulasi Rao Naineni, S/o. Sri (Late) N. Narayana Rao, H.No.716' Vivekanandanagar Colony, Kukatpally, Hyderabad - 500072. ...PETITIONER AND The lncome Tax Officer, Ward -1 1(1 ), Signature Towers, Opp. Botanical Gardens, Kondapur, Hyderabad - 500084. ...RESPONDENT Petition Under Article 226 of the Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to pass an order or direction especially one in the nature of WRIT OF MANDAMUS holding that the order dated 30.06.2022 passed under section 14BA(d) of the Act with DIN and Order No.ITBA/COMlFl1712022- 2311043686674(1), for Assessment Year 2013-14, and the notice dated 30.06.2022 issued under section 148 of the Act with DIN and Document No.ITBA/AST/Ml 1 48 I 12022-2311 043691 935(1 ) for assessment year 201 3-1 4 as being illegal, arbitrary and unsustainable on facts and in law being against the spirit of the provisions of section 148A of the Act and consequently set aside the same. l.A.NO:1 OF 2022 Petition Under Section 15'1 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to stay all further proceedings pursuant to issuance of notice dated 30.06.2022 under section 148 of the Act with DIN and Document No. ITBA/AST/M/1 48 1 I 2022-23 I 104369 1 935( 1 ) fo r assessment y ear 2O1 3-1 4. Counsel for the Petitioner : SRI.K.VASANT KUMAR Counsel for the Respondents : Ms.K.MAMATA CHOUDARY (SC) The Couft made the following COMMON ORDER

THE HON'BLE THE CHIEF JUSTICE UJJAL BHTIYAN THE HONOURABLE MRS JUSTICE SUREPALLI NANDA WRIT PETITION Nos.2888O & 28893 of2022 COMMON ORDER: (Per the Hon'ble the Chief Justlce Ujjal Bhtgan) Heard Mr. K.Vasant Kumar, learned counsel for the petitioner and Ms. K.Mamata Choudary, learned Standing Counsel for Income Tax Department for the respondent. 2. Petitioner is aggrieved by orders dated 30.06.2022 passed by the respondent under Section 148A(d) of the Income Tax Act, 196 1 (briefly referred to hereinafter as the Act') for the assessment years 2Ol3-14 and 2014- 15. 3. Petitioner is an assessee under the Act having the status of an individual. He is also an assessee under the'Act having the status HUF. t { / ,a ,i, AND I : 4. Admittedly for the assessment yeat 2074-15, petitioner as the individual did not file aly income tax return' Respondent had issued notice to the petitioner on 17 .O4.2O2L under Section 148 of the Act. Following order passed by the I I

HC^] & SNJ W.P.Nos.28B8O & 28893 of 2022 Supreme Court in Union of India vs. Ashish Agarwall, the aforesaid notice was construed to be notice under Section 148A of the Act. Accordingly petitioner was required to show cause the source of investment for the construction of the building called NSN Enclave. Petitioner submitted response on 27.05.2022 stating that the source of the investment was advance received from M/s. Bhavya's Construction private Limited. In addition, certain portion of the investments came from the family savings. These investments were disciosed in the income tax return filed by the petitioner as HUF for the assessment year 2012-13. Respondent did not accept the explanation of the petitioner and gave the following reasons for such non-acceptance: "(i) The assessee failed to furnish verifiable evidence in support of his claim of the source of investment in the NSN Enclave. (ii) On perusal of the assessment order copy of the assessee's HUF, it is lound that the assessing officer has detected the assessee's undisclosed capital gain of Rs.2,58,54,703/-. Hence, the assessee submission of his HUF return of Income and computation for the A.y. 2012- 13 does I { | 2022 SCC Online SC 543 2

/ .* 3 HCJ & SNJ W.P.Nos.28880 & 28893 of 2022 not bring any supporting evidence for the source of his investment in the NSN Enclave. The assessee has not fi1ed return of income for A.Y. 2Ol4-15 artd failed to admit any income for the A.Y.2014-15. Further, in absence of any satisfactory explanation in response to the letter issued to the assessee on 2O.O5.2O22, it ts concluded that the total value of above tra-nsaction is income chargeable to tax in the hands of assessee for AY 2014- 15." 5. Taking the view that income in the form of asset chargeable to tax which had escaped assessment would be more tharr Rs.SO lakhs, it has been held to be a fit case to initiate proceedings under Section 147 of the Act and therefore directed issuance of notice under Section 148 of the Act. Consequently, notice under Section 148 of the Act was issued on 30.06.2022 itself. 6. Following the proceedings held on 12.07.2022, learned counsel for the petitioner has liled a memo of additional material papers enclosing therewith returns Illed by the HUF for the assessment year 2Ol2-13 onwards upto assessment year 2016-17. However, the fact remains that for the assessment year under consideration i.e., assessment yegr'2014-15, petitioner in his individual status did not fiie t l

4 t i HCJ& SAU W.P.Nos.2888O & 28893 af 2C22 return. Learned counsel for the petitioner submits that s:ince there r.r,as no taxable income, petitioner did not file return. 7 . We are unable to accept such contention of iearned counsel for the petitioner. The order under Section 1a8(d) of the Act is not even at the interlocutory stage. It is at a stage prior to issuance of notice under Section 148 of the Act. The conclusions reached b..,, the respondent are only for the purpose as to whether it is a fit case for reopening and for issualce of notice under Section 148 of the Act-. These are not conclusive findings of the respondent. B. Therefore, in the facts and circumstances of the case, we are not inclined to interfere and interdict the proceedings midway through. Petitioner would have a,ll the rights and opportunities to defend himself in the proceedings under Sectl on 147 of the Act. If petitioner continues to remain aggrieved thereafter, he has before him a hierarchy of remedy by u,ay of appeals. In such circumstances, we are not inclined to invoke our writ jurisdiction under Article 226 of the Constitution of India i I

t HC] & SNJ W.P.Nos.2888O & 28893 of 2022 9 . Writ Petitions are accordingly dismissed. Hou,evcr, there sha1l be no order as to costs. 10. Miscellaneous applications pending, if any, in the Writ Petitions, shall stand closed. 5 \ //TRUE COPY// SD/.I.NAGALAKSHMI DEPUTY REGISTRAR ? SECTION OFFICER To 1 2 ? 4 One CC to SRI.K.VASANT KUIVAR, Advocate [OPUC] One CC to MS.K.MAMATA CHOUDARY, Advocate [OPUC] Two CD Copies One spare copy S A SW q I

HIGH COURT DATED:2810712022 COMMON ORDER nt"*' -<\: .' t: .1- 01 liri 2012 WP.Nos.28880 AND 28893 of 2022 DISMISSING THE WRIT PETITIONS WITHOUT COSTS. a l: '!. t)./Y I - i(\

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