Telangana State Industrial Infrastructure vs. Union of India

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WP/37836/2022HC TelanganaHBHC01055802202213 October 2022Bench: C.V. BHASKAR REDDY,UJJAL BHUYAN8 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the order passed by Respondent No.3 under Section 148A(d) dated 31.07.2022 was devoid of reasons, violating the principles of natural justice. The Court observed that the respondent simply recorded that the objections were considered but found not acceptable, without providing any justification. The Court emphasized that even at the stage prior to issuing a notice under Section 148, the assessing officer is required to briefly assign reasons as to why the assessee's objection/reply is not acceptable and why reopening of assessment is a fit case. Failure to do so would render the order under Section 148A(d) an empty formality, contrary to legislative intent. Consequently, the Court set aside the order dated 31.07.2022 and remanded the matter back to Respondent No.3 for passing a fresh order in accordance with law. The consequential notice dated 31.07.2022 issued under Section 148 was also quashed.

What were the facts?

The petitioner, Telangana State Industrial Infrastructure Corporation Limited, a fully owned State Government undertaking, challenged proceedings initiated for assessment year 2015-16. Initially, a notice dated 30.06.2021 under Section 148 of the Income Tax Act, 1961, was issued. Following the Supreme Court's decision in Union of India v. Ashish Agarwal, this notice was treated as one under Section 148A. The petitioner submitted a reply on 28.06.2022, stating that an amount of Rs. 25,99,17,726.00 represented expenditure for providing infrastructure, which had been disallowed by the assessing officer in a prior assessment year, and no further appeal was preferred by the Income Tax Department against that disallowance. However, the respondent No.3 (Deputy Commissioner of Income-tax) passed an order dated 31.07.2022 under Section 148A(d) of the Act, brushing aside the petitioner's objections and treating the amount as income escaped assessment, chargeable to tax.

What were the issues?

1. Whether the order passed by Respondent No.3 under Section 148A(d) of the Income Tax Act, 1961, dated 31.07.2022, is bad in law for being devoid of reasons, thereby violating the principles of natural justice? (Question of law) Assessee's Contention: The petitioner argued that the order dated 31.07.2022 was passed without assigning any reasons for rejecting their objections, making it violative of natural justice. They contended that the amount in dispute represented expenditure and not income escaped assessment. Revenue's Contention: The revenue submitted that following the order dated 31.07.2022, a notice under Section 148 was issued on the same day, and the petitioner would have the liberty to raise objections in the reassessment proceedings. They also argued that the assessing officer had considered the objections but found them not acceptable.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148

AI-generated summary — verify with the full judgment below

HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Speciat Originat Jurisdiction) THURSDAY ,THE THIRTtrtr rw o iii o u il'ffi :i['fl,if,YfrF! c ro B E R [ 329 PRESENT Between: I;lil,.gilX *ti3"or'01fIil:-rlllas-tru,clyre, corporation Lrd Basheerbash, R6ddy. -"- ' '-v v, v '\'c unarrman and [Vlanaging Director, g.Ventii t,tu-r-r sr:il"n, ...PETITIONER Hif,i " lndia, Rep. by its Spcretary Finance Department, North Block, New thief Commissioner of lncome{ax, Andhra pradesh and Telangana State, Hyderabad. Deputy Commissioner of lncome-tax, Circle-2(.1), Signature Towers, Hyderabad ...RESPONDENTS 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 issue a writ in the nature of Mandamus or any other suitable writ, order or direction, setting aside the proceedings u/s. 14BA(d) dated 311112022 for assessment year 2015-16 bearing DIN No.ITBA/COM/F11712022-2311044372623(1) and the notice on the petitioner Corporation uls148 dated 311712022 for asst. year 2O15-16 bearing PANo.AAFCT 1093A, reopening the assessment as illegal, arbitrary, unsupportable in law and contrary to the statutory provisions and consequently 1 2 3 THE HONoURABLE THE I TH E HONOU RAB LE S R., d'[::.;::::,;:"::JJ WR|T pETtTtON NO: 37836 OF 2022 AND

declare that the reopening of the assessment on the petitioner Corporation for "=.;-r"r,2015-16 is bad and unenforceable' IANO: 1 OF 2A22 Petition under Section 151 in the affidavit filed in support of stay the Proceedings u/s 14BA(d) DIN No.ITBA/C Ol'/,tF I 17 t2o22' 2 daled 31t7 t2O22 for asst Year petitioner CorPoration and staY a Counsel for the Petitioner : SRI' Y RATNAKAR Counsel for the Respondent No'1 : SRI B MUKHERJEE (CENTRAL GOVT COUNSEL) Counsel for the Respondent Nos' 2 & 3 : M/s' K MAMATA CHOUDARY' SC FOR INCOME TAX The Gourt made the following: ORDER CPC praying that in the circumstances stated the petition, the High Court may Oe Ot-easeO, 11 daled 31t712022 for asst' year 2015-16 beartng 3t1044372623(1) and also the notice u/s 148 2015-16 bearing PANo AAFCT 1093A on the ll other consequential proceedings' , I I I I I

,f C I S JJAL l)!ltDAN I T 'f QB!ER, tir''rr'' tt'"' manner: 4N! w.P,N of l0 t. S L- Y t) E C z 'i,i rtr'( l,il lttiti" l.ltNl Bl't4't ) Lleard Mr. Y.Ratnakar, leamed counsel lor the petitioner; Mr. B.Mukheriee, learned Iv{s. K.Mamata Choudary Income Tax for resPondents No2 & 3' 2. Challenge made in this writ petidon is to the order datecl3l.oT.2022passedbyresPondentNo.Sunder Section 148A(d) of the Income Tax Act' 1961 (briefly 'the Act' hereinafter) for the assessme nt year 20t5- 16' 3. The controversy in the Present writ petition was summed up by this Court in the order dated 10'10'2027 it the following counsel for resPondent No'1; and leamed Senior Standing C-ounsel' Petitioner before us is the Telangana State Industrial Infrastmcture Corporation Limited' which is a fully owned State Governnrent undertaking' Obiect of the petitioner is to promote industrial I

) developnrcnt in the State < i nf 'rs r *rct .ur-. f :rc ilit ies r., "il;fi :::: *Xi": For tlrc .Nsessrncnt yrar 2a15-16, respondent -l had issuetl norice d:rted 30.06.2A2t under ion 148 of tlre Income Taur Act, 1961 (biefly,the hcreiiafter). Following the decision of the No. Scct Act' Suprtrnc (burt IN flnion of India Aganvalr, thc said notice was construed underSection i4gA of the Act. v. Ashish to be one Petitioner submitted or-t 28.06.2a22 *4rerein t:o]T the reopen,rg nodce rt was contended that the anlounr ol' Rs.25,99,17,726.00 represented the expcnditurc to be inc ured by the petitioner for proiiding infrastructr-ue in industrial eshtes and rndustrial parks. Such amounr was disallowed by the ;usessing officer for the Hou,cveq rhe sirrne .,"", oJ*o'il.T.;;'^*;: aurhoriry against which Income Tax Depanrnent did not prefer funher appeal before the Income Tax Appeilate Tribunal. obje that Respondent No.3 simply brushed aside the above ction raised by the petitioner and took the view the above amounr chargeable to tax which had esc represented incomt: aped assessment I 2022 scc Online sc s43

.'t Pin,t .f,tiic we find that rcspondent No.l did not i-rssign ;1ny reasons rvhi.le rejecting the objection raise'd bv the pctitioncr. That being the position, a vier,r.' can be tlken th.rt the in.rpugned order dated 31.07.2022 being devoid of rcasons is violttive of the principles of natural justice. At this stage, Ms. K.Mamata Chowdhary leamed Senior Stending Counsel, Income Tax Depenment prap for some time to obtain instructions- Let her obtain instructions and place the sarne before the C-oun on 13.10.2022. In the meanwhile, there shall be stay of the impugned order dated 31.07.2022 passed by rrspondent No.3. 4. Leamed Senior Standing C-ounsel for respondents No'2 and 3 submits that following the order dated 31.07-2022, norice unc{er Section 148 of the Act was issued on the same day' In the reassessment proceeding, Petitioner would have all the libeny to raise its objection. 5. However, we are of the view that such submission made by leamed Senior Standing Counsel is not an adequate answer to what /we hadobserved in the order dated 10.10.2022- As already noticed

-l in the said order, in rlrsponsc to tlte notice of respondent No'l dated 30.A6.2021, petitioncr lrad submitted reply on 28.06.2022. ln the ordcr dated 31.07'2022, rve find that respondent No.3 simply rccorded that he had considered the objections raised but found the serne to be not acceptable' No reasons have been assigned as to why the ob.iections we re not lound acceptable. We are of tl're view that even at a stage pdor to issuance of notice under Sectiort 148 i.e., while passing an order under Section 148A(d) o[ thc Act, the assessing officer is required to brieftyassign reasons as ro whyobiection/replyof the assessee is not acceptable and why it is a fit case for reopening of assessment' Otherwise, an order passed under Section 148A(d) of the Act would be an empty formality, u4rich is not the intention of the legislature. 6. C-onsequently and in the light of the above, we set aside the order of respondent No.3 dated 31..07.2022 and remand the matter back to respondent No.3 for passing fresh order in accordance with larv. --

7.

Necdlcss ro say, following quashing of rhe order oi responclerrt No.J clated 31.07.2022, the consequential noticc dated 3l'07'2022 issued bythe said aurhoriryunderSection 14g of the Act woulcl also stand quashed. Writ Pctition is accordinglyallowed. No cosrs. As a sequel, rniscellaneor-s peririons, pending if any, stand 8 ,.rr??'dtt[lT'Xii sEcnoilx;iFlcER closed. To, I i I SB PS 1. The Secretary Finance Department, Union of lndia, North Block, New Delhi ' J[?f?fl3.H#ssioner or rncome-tax, Andhra pradesh and reransana t lifi"?:tjy co mm iss io ner of I ncome-rax, ci rcte-2(1 ),S isna rure Towers, 4. One CC to SRt. y RAT 5 ONC CC tO SRI ' "J:M1::T1'il:::} COUNSEL) IOPUC] 6. One CC to M/s. K MAMATA CHOUDARY, SC FOR TNCOME TAX.IOPUCI 7. Two CD Copies 8. One Spare Copy (ri IITRUE COPYII \

HIGH COURT DATED:1 311012022 n ORDER I q ni:r 7n77. WP.No.37836 of 2022, ALLOWING THE WRIT PETITION WITHOUT COSTS a-, \ _^\-

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