M/S ESTER INDUSTRIES LTD. vs. ASSISTANT CIT, NEW DELHI AND ANR.

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W.P.(C)/7889/2022HC DelhiDLHC01019649202224 May 2022Bench: HON'BLE MR. JUSTICE MANMOHAN,HON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the writ petition and applications. The Court found that the petitioner had not demonstrated that the impugned notice was governed by the amended procedure under Section 148A. Furthermore, the Court held that the petitioner was essentially challenging the impugned order on merits. Citing the Supreme Court's decision in Commissioner of Income Tax and Ors. Vs. Chhabil Das Agarwal (2014) 1 SCC 603, the Court reiterated that when the Income Tax Act provides a complete machinery for assessment/reassessment, the assessee cannot abandon that machinery and invoke the High Court's jurisdiction under Article 226. The Court concluded that the present case did not fall under the exceptional grounds for maintaining a writ petition at the interim stage in tax matters. The dismissal was with liberty to the petitioner to raise all contentions and submissions in the pending appeal and rectification proceedings.

What were the facts?

The petitioner, M/s Ester Industries Ltd., filed a writ petition challenging a Notice under Section 148 of the Income Tax Act, 1961, dated March 31, 2021, an Order under Section 147 read with Section 144B, and a demand notice under Section 156, all dated March 30, 2022. The petitioner contended that the impugned order and notice were issued mechanically and without application of mind, failing to consider their detailed reply. Specifically, they argued that a short-term capital loss of Rs. 35,11,525/- should be carried forward, not disallowed and reduced from business loss. They also alleged procedural errors in issuing the notice under the old Section 148 and converting it to the new Section 147/148 read with Section 148A without proper inquiry or opportunity to be heard. The revenue stated that the petitioner had already filed an appeal and a rectification application against the impugned order.

What were the issues?

1. Whether the impugned notice and order were issued mechanically and without application of mind, violating the principles of natural justice and statutory requirements, particularly concerning the disallowance of short-term capital loss and its set-off against business loss (under Section 72)? 2. Whether the notice under Section 148 was issued illegally under the old provisions, and subsequently converted to the new Section 147/148 read with Section 148A without complying with the mandatory requirements of Section 148A, including inquiry, notice, and opportunity of hearing? Assessee's Contentions: - The impugned order and notice were issued illegally, mechanically, and without application of mind. - The detailed reply submitted during assessment proceedings was not considered. - A short-term capital loss of Rs. 35,11,525/- should be carried forward for set-off against short-term capital gains, and its disallowance from business loss is incorrect. - Grave error was committed in issuing the notice under the old Section 148 without complying with statutory requirements, and its conversion to the new Section 147/148 read with Section 148A was done without inquiry, notice under Section 148A, or effective opportunity of hearing. - The tax demand of Rs. 43,43,36,124/- raised against a returned loss of Rs. 5,71,43,593/- is excessive. Revenue's Contentions: - The petitioner has already filed an appeal challenging the impugned order. - The petitioner has also filed a rectification application which is pending consideration.

Which sections of the Income-tax Act were involved?

Section 148,Section 147,Section 144B,Section 156,Section 72,Section 148A

AI-generated summary — verify with the full judgment below

W.P.(C) 7889/2022 Page 1 of 3 $~A-11 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 7889/2022 & CM APPLs.24093-24094/2022 M/S ESTER INDUSTRIES LTD. ..... Petitioner Through: Mr. R. Santhanam, Advocate with Mr.Arjun Prasad Sinha, Advocate. versus ASSISTANT CIT, NEW DELHI AND ANR. ..... Respondents Through: Mr.Zoheb Hossain, Sr.Standing Counsel with Mr.Vipul Agrawal and Mr.Parth Semwal, Jr.Standing Counsel. % Date of Decision: 24th May, 2022 CORAM: HON’BLE MR. JUSTICE MANMOHAN HON’BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMOHAN, J (Oral): 1. Present writ petition has been filed challenging the Notice under Section 148 of the Income Tax Act, 1961 (‘the Act’) dated 31st March, 2021, Order under Section 147 read with Section 144B and the demand notice issued under Section 156 of the Act dated 30th March, 2022. 2. Learned Counsel for the Petitioner states that the impugned order and notice have been issued and passed illegally, mechanically and without application of mind. This is a digitally signed Judgement. NEUTRAL CITATION NO: 2022/DHC/002037

W.P.(C) 7889/2022 Page 2 of 3 3. He states that the impugned Order has been passed without considering the detailed reply submitted by the petitioner during the assessment proceedings. He states that the short term capital loss of Rs.35,11,525/- can only be carried forward for set off against short term capital gain in subsequent years and, therefore, the question of disallowing the loss so computed and reducing the same from the business loss of the assessee entitled to be carried forward under Section 72 for set off in future does not arise and the impugned order is liable to be quashed. 4. He also states that the respondents have committed grave error in issuing the notice under old Section 148 without complying with the mandatory requirements of the statute and thereafter converting the case as falling under the new section 147/148 read with Section 148A when no enquiry was conducted and no notice under Section 148A was issued and no effective opportunity of hearing provided to the assessee. 5. He states that as against a returned loss of Rs.5,71,43,593/-, the respondents have raised a tax demand of Rs.43,43,36,124/-. 6. Per contra, learned counsel for the respondent-revenue, who appears on advance notice, states that the petitioner has already filed an appeal challenging the impugned order. He further states that the petitioner has also filed a rectification application which is pending consideration. 7. Having heard learned counsel for the parties and having perused the paperbook, this Court finds that the Petitioner has not brought on record anything to prove that the impugned notice issued shall be governed by the amended procedure under Section 148A of the Act. 8. This Court is also of the view that Petitioner is basically challenging the impugned order on merits. The Supreme Court in Commissioner of This is a digitally signed Judgement. NEUTRAL CITATION NO: 2022/DHC/002037

W.P.(C) 7889/2022 Page 3 of 3 Income Tax and Ors. Vs. Chhabil Das Agarwal, (2014) 1 SCC 603 has held that as the Income Tax Act, 1961 provides complete machinery for assessment/reassessment of tax, assessee is not permitted to abandon that machinery and invoke jurisdiction of High Court under Article 226. 9. This Court is further of the view that the present case does not fall under the exceptional grounds on which a writ petition is maintainable at the interim stage in tax matters. 10. In view of the above, the present writ petition and applications are dismissed with liberty to raise all contentions and submissions in the appeal and rectification proceedings. MANMOHAN, J MANMEET PRITAM SINGH ARORA, J MAY 24, 2022 TS This is a digitally signed Judgement. NEUTRAL CITATION NO: 2022/DHC/002037

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