YOGENDER MOHAN RUSTAGI vs. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 28 DELHI & ANR.

PDF · subscribers
W.P.(C)/17022/2024HC DelhiDLHC01091330202412 December 2024Bench: HON'BLE MR. JUSTICE TUSHAR RAO GEDELA,HON'BLE THE ACTING CHIEF JUSTICE6 pages
AI SummaryRemanded

What did the High Court hold?

The Delhi High Court set aside the impugned order dated 31.08.2024 passed under Section 148A(d) and the notice dated 31.08.2024 issued under Section 148 of the Income Tax Act, 1961. The Court found that the AO had not properly considered the petitioner's replies, particularly the one dated 30.08.2024, which was filed within the stipulated period. The Court noted that the ledger account, as reproduced, indicated cash payments made by the petitioner, not cash receipts, contrary to the Revenue's initial interpretation. Furthermore, the Court observed that the AO had not made specific allegations that the petitioner had paid money through banking channels and received cash back. The matter was remanded to the AO to consider the petition's averments and the petitioner's replies afresh. The AO was also permitted to seek further information from the petitioner. The principle derived is that reassessment proceedings under Section 148A must be based on a thorough examination of the assessee's responses and specific allegations, and procedural lapses by the AO can lead to the quashing of such proceedings.

What were the facts?

The petitioner, Yogender Mohan Rustagi, filed a writ petition challenging a notice dated 08.08.2024 under Section 148A(b) and an order dated 31.08.2024 under Section 148A(d) of the Income Tax Act, 1961, concerning Assessment Year 2018-19. The Assessing Officer (AO) initiated proceedings based on information from a search at M/s VKC Nuts Private Limited, which indicated transactions with entities including the petitioner's proprietorship concern, M/s Mata Din Bhagwan Dass. The AO's notice highlighted certain cash receipts in the petitioner's ledger account as indicative of escaped income. The petitioner responded to the notice on 14.08.2024 and further elucidated on 30.08.2024, asserting that cash entries were actually banking transactions. The AO passed the impugned order without considering the petitioner's second reply, deeming it a fit case for a Section 148 notice.

What were the issues?

1. Whether the Assessing Officer (AO) correctly passed the order dated 31.08.2024 under Section 148A(d) and issued the notice dated 31.08.2024 under Section 148 of the Income Tax Act, 1961, for Assessment Year 2018-19, considering the petitioner's replies. Assessee's Contentions: - The petitioner argued that the AO failed to consider his reply dated 30.08.2024, which provided detailed explanations for the entries in the ledger account. - The petitioner contended that the cash entries reflected in the ledger were, in fact, payments made through banking channels and were incorrectly recorded as cash receipts in the books of VKC Group. - The petitioner asserted that the AO's notice lacked specific allegations regarding the nature of the transactions. Revenue's Contentions: - The Revenue, on instructions, stated that the petitioner paid amounts through banking channels to VKC Group and received equivalent amounts in cash. - However, the Revenue was unable to point out any such allegations in the notice issued by the AO.

Which sections of the Income-tax Act were involved?

Section 148A(b),Section 148A(d),Section 148,Section 147

AI-generated summary — verify with the full judgment below

W.P. (C) 17022/2024 Page 1 of 6

$~53 * IN THE HIGH COURT OF DELHI AT NEW DELHI

Date of Decision : 12.12.2024

+ W.P.(C) 17022/2024 & CM APPL. 72144/2024

YOGENDER MOHAN RUSTAGI .....Petitioner

Through: Mr Vibhu Gupta, Advocate.

versus

ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 28 DELHI & ANR. .....Respondents Through: Mr Shlok Chandra, SSC, Ms Naincy Jain and Ms Madhavi Shukla, JSCs and Mr Sushant Pandey, Advocate. CORAM:

HON'BLE THE ACTING CHIEF JUSTICE

HON'BLE MR. JUSTICE TUSHAR RAO GEDELA

VIBHU BAKHRU, ACJ. (ORAL)

1.

The petitioner has filed the present petition, inter alia, praying as under:- “a) Issue writ of certiorari or writ, order or direction in the nature of certiorari, or any other appropriate writ, order or direction under Article 226/227 of the Constitution of India, quashing notice dated 08.08.2024 issued under section 148A(b) of the Act; b) Issue writ of certiorari or writ, order or direction in the nature of certiorari, or any other appropriate writ, order or direction under Article 226 / 227 of the Constitution of India quashing impugned order dated 31.08.2024 passed under section 148A(d) of the Act and notice dated 31.08.2024 issued under Digitally Signed By:RAM KUMAR Signing Date:23.12.2024 17:36:40 Signature Not Verified

W.P. (C) 17022/2024 Page 2 of 6

section 148 of the Act in the case of the Petitioner for assessment year 2018-19, and all actions/ proceedings consequential thereto; c) Grant ad-interim ex-parte stay on the reassessment proceedings initiated under section 147/148 of the Act for the assessment year 2018- 19 during pendency of the present petition;”

2.

The Assessing Officer (hereafter the AO) had issued a notice dated 08.08.2024 under Section 148A(b) of the Income Tax Act, 1961 (hereafter the Act) in respect of the assessment year (AY) 2018-19 setting out certain information which according to the AO was suggestive of the petitioner’s income escaping assessment. 3. The notice indicates that a search was conducted at the corporate office of M/s VKC Nuts Private Limited (hereafter M/s VKC Nuts). During the course of search, certain hard disk drives were seized and the statement of the managing director of M/s VKC Nuts was recorded. According to the AO, the hard disc contains information, which indicated that there were certain transactions (including cash sales and purchases) made by M/s VKC Nuts with certain entities which were also mentioned in the books of account of ‘Big Wave Traders’. 4. The analysis of the data indicated that there were certain transactions with M/s Mata Din Bhagwan Dass, the proprietorship concern of the petitioner herein. The ledger account as maintained in the books of accounts, found during the search, was set out in the notice. The same is reproduced as under:-

Digitally Signed By:RAM KUMAR Signing Date:23.12.2024 17:36:40 Signature Not Verified

W.P. (C) 17022/2024 Page 3 of 6

Ledger Matadin Bhagwandas 1-Apr-17 to 31-Mar-18 Date Particulars Vch Type Vch no. Debit Credit 03-Jan-18 To Almod ac Journal D-920 8833323

(Ref. AGAE ZERO@17190/)

05-Jan-18 By Cash Receipt

4000000

(agst rtgs-1741)

08-Jan-18 By Cash Receipt

3000000

(agst rtgs-vkc j&k1741)

17-Jan-18 By Cash Receipt

33180

(agst cheq)

18-Jan-18 By I Disc Journal

143 18-Jan-18 By Cash Receipt

1800000

(AGST RTGS VKC 08/01/18)

22 -Feb-18 By Pur Shp Shp Purchase T-M-002

1519600 24-Feb-18 By Pur Shp Shp Purchase T-M-011

1531850 27-Feb-18 By Pur Shp Shp Purchase T-M-018

1568600 06-Mar-18 To Cash Payment 1526000

AG.RTGS. VKC 06.03.18

14-Mar-18 To Cash Payment 3162600

(AGST RTGS VKC 13/03/18)

13521923 13453373

By Closing Balance 68550 13521923 13521923

5.

According to the AO, the cash receipts as reflected in the said ledger account was suggestive that the income of the petitioner had escaped assessment. In addition, other allegations were also made in the said notice. 6. The petitioner responded to the notice on 14.08.2024 within the time as prescribed. It is the petitioner’s case that he submitted another reply dated 30.08.2024 to further elucidate his reply and provided entry wise comments. Digitally Signed By:RAM KUMAR Signing Date:23.12.2024 17:36:40 Signature Not Verified

W.P. (C) 17022/2024 Page 4 of 6

7.

Thereafter, the AO passed an order dated 31.08.2024 (hereafter the impugned order) under Section 148A(d) of the Act holding that it was a fit case for issuance of the notice under Section 148 of the Act. The said order indicates that the AO did not consider the reply furnished by the petitioner on 30.08.2024. 8. It is also apparent that the AO has not examined the reply furnished within the stipulated period as the same was rejected with the observation that the petitioner had merely furnished documents for the entries in the ledger, which were made through banking channel. The AO concluded that the petitioner had failed to furnish a reply with respect to the entries mentioned in the ledger account as set out in the notice. 9. The impugned order also does not examine whether the entries made through the banking channel furnished by the petitioner correspond with the cash entries as is reflected in the ledger account that were disclosed in the notice. This is relevant as it is the case of the petitioner that the cash entries reflected in the ledger account were in fact payments made through banking channels. Even according to the AO, the petitioner had furnished the details of certain entries which were made through banking channel. The additional reply furnished by the petitioner on 30.08.2024 sets out the petitioner’s comments regarding each cash entry reflected in the said ledger account, which admittedly was not considered by the AO as the same was filed after the period for furnishing the reply had expired. 10. The learned counsel appearing for the Revenue, on instructions, states that the petitioner had paid the amounts through banking channel to VKC Digitally Signed By:RAM KUMAR Signing Date:23.12.2024 17:36:40 Signature Not Verified

W.P. (C) 17022/2024 Page 5 of 6

Group and received back equivalent amount in cash. However, the learned counsel for the Revenue is unable to point out any allegations to that effect in the notice. 11. A plain reading of the ledger account as is reproduced above reflects that the petitioner had paid consideration for supplies in cash. The cash entries are thus reflected as credit entries and not debit entries. Thus, the Revenue’s contention that the ledger account that the petitioner had received cash is erroneous. The ledger account in question reflects that the petitioner had paid cash. 12. As noted above, it is the petitioner’s case that the entries which are reflected as cash payments made by the petitioner are in fact the payments made through banking channel and have been incorrectly reflected as cash receipts in the books maintained of VKC Group. 13. It does not appear that the AO had made any specific allegation that the petitioner had paid money through banking channel and received back the cash against those payments. 14. In view of the above, we consider it apposite to set aside the impugned order dated 31.08.2024 passed under Section 148A(d) of the Act as well as the notice dated 31.08.2024 issued under Section 148 of the Act and remand the matter to the AO to consider afresh in light of the averments made in the present petition and the replies furnished by the petitioner on 14.08.2024 and 30.08.2024. We also clarify that the AO would be entitled to seek such further information from the petitioner as he considers necessary for taking an informed decision. Digitally Signed By:RAM KUMAR Signing Date:23.12.2024 17:36:40 Signature Not Verified

W.P. (C) 17022/2024 Page 6 of 6

15.

The petition is disposed of in the aforesaid terms. Pending application is also disposed of. VIBHU BAKHRU, ACJ

TUSHAR RAO GEDELA, J DECEMBER 12, 2024 M

Click here to check corrigendum, if any

Digitally Signed By:RAM KUMAR Signing Date:23.12.2024 17:36:40 Signature Not Verified

More judgments on Section 148A(b)

All 524 judgments and leading authorities on Section 148A(b) →

Recent GST High Court judgments

Search GST case law →