JAIN ENTERPRISES vs. INCOME TAX OFFICER, WARD 36(1) , DELHI & ORS.

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W.P.(C)/7697/2023HC DelhiDLHC01021845202330 May 2023Bench: HON'BLE MR. JUSTICE RAJIV SHAKDHER,HON'BLE MR. JUSTICE GIRISH KATHPALIA3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the impugned order dated 24.03.2023 passed under Section 148A(d) of the Income Tax Act, 1961, and the consequential notice dated 24.03.2023 issued under Section 148 of the Act, were to be set aside. The Court found that the contradiction between paragraph 2.1 and paragraph 4 of the order, regarding whether the assessee had filed a return of income, was a fatal error affecting both parties. To remedy this, the Court directed that the AO should pass a fresh order after providing the petitioner an opportunity to file a reply to the notice dated 04.03.2023 issued under Section 148A(b). The petitioner was given four weeks to file its response. The AO was further directed to grant a personal hearing to the petitioner's authorized representative and issue a speaking order thereafter. The Court clarified that setting aside the order would not impact the merits of the case. The charge against the petitioner was entering into fictitious purchase transactions with M/s Krishna Traders, quantified at Rs. 1,14,34,000/-.

What were the facts?

The petitioner, Jain Enterprises, filed a writ petition before the Delhi High Court challenging an order dated 24.03.2023 passed under Section 148A(d) of the Income Tax Act, 1961, and the consequential notice dated 24.03.2023 issued under Section 148 of the Act. The petitioner also challenged a show cause notice dated 04.03.2023 issued under Section 148A(b) of the Act by the Income Tax Officer, Ward 36(1), Delhi. The assessment year in question is 2019-20. The primary contention of the petitioner was that there was no application of mind by the Assessing Officer (AO). A contradiction was noted between paragraph 2.1 of the impugned order, stating the assessee filed a return declaring income of Rs. 56,09,080/- and undertook transactions of Rs. 1,14,34,000/-, and paragraph 4, which stated the petitioner had not filed its return of income. The petitioner had not filed a reply to the Section 148A(b) notice.

What were the issues?

1. Whether the order dated 24.03.2023 passed under Section 148A(d) of the Income Tax Act, 1961, and the consequential notice dated 24.03.2023 issued under Section 148 of the Act, are vitiated by a lack of application of mind by the Assessing Officer, thereby rendering them liable to be quashed? (Question of law and mixed fact and law, concerning Section 148A and Section 148 of the Act). Assessee's Contention: The petitioner argued that there was no application of mind by the AO, evidenced by the contradictory statements in paragraphs 2.1 and 4 of the order dated 24.03.2023. Paragraph 2.1 mentioned the assessee filed a return and undertook transactions, while paragraph 4 stated no return was filed. The petitioner also stated it had an explanation for the flagged transaction. Revenue's Contention: The revenue, through its senior standing counsel, suggested that the contradiction might be an inadvertent error, noting that the notice under Section 148A(b) did not contain the assertion that no return was filed. The revenue did not file a counter-affidavit, agreeing to argue based on the existing record.

Which sections of the Income-tax Act were involved?

Section 148A,Section 148

AI-generated summary — verify with the full judgment below

Heard together (2 matters)

W.P.(C) 7697/2023
W.P.(C) 7674/2023

Read from the judgment's own cause title. This page is filed under one of them.

W.P.(C) 7697/2023

Pg. 1 of 3 $~56

* IN THE HIGH COURT OF DELHI AT NEW DELHI % Decision delivered on:30.05.2023

+ W.P.(C) 7697/2023

JAIN ENTERPRISES ..... Petitioner Through: Mr Inder Paul Bansal and Mr Vivek Bansal, Advocate

versus

INCOME TAX OFFICER, WARD 36(1), DELHI & ORS. ..... Respondent Through: Mr Vipul Agrawal, Sr Standing Counsel with Mr Gibran Naushad and Ms Sakshi Shairwal, Jr Standing Counsels

CORAM:

HON'BLE MR. JUSTICE RAJIV SHAKDHER

HON'BLE MR. JUSTICE GIRISH KATHPALIA

[Physical Hearing/Hybrid Hearing (as per request)]

RAJIV SHAKDHER, J. (ORAL): W.P.(C) 7674/2023 & CM No.29696/2023 [Application filed on behalf of the petitioner seeking interim relief] 1. Issue notice. 2. Mr Vipul Agrawal, learned senior standing counsel who appears on behalf of the respondents/revenue accepts notice. 4. Mr Agrawal says that in view of the order that we propose to pass, he does not wish to file a counter-affidavit in the matter and that he will argue the matter based on the record presently available with the court. 5. Therefore, with the consent of the counsel for parties, the writ petition is taken up for hearing and final disposal of the case at this stage itself. 6. This writ petition concerns Assessment Year (AY) 2019-20. Digitally Signed By:NEELAM SHARMA Signing Date:24.06.2023 14:50:11 Signature Not Verified

W.P.(C) 7697/2023

Pg. 2 of 3

7.

Petitioner seeks to assail order dated 24.03.2023 passed under Section 148A(d) of the Income Tax Act, 1961 [in short, “the Act”]. Besides this, challenge is also laid to the consequential notice of even date i.e. 24.03.2023 issued under Section 148 of the Act. 7.1 In addition, thereto, petitioner has also challenged the show cause notice dated 04.03.2023 issued under Section 148A(b) of the Act issued by respondent no. 1. 8. The short ground on which the counsel for the petitioner seeks to assail the impugned order is that there has been no application of mind. For this purpose, counsel for petitioner has drawn our attention to paragraph 2.1 of the order dated 24.03.2023 wherein interalia it has been stated that the assessee had filed the return declaring his income amounting to Rs.56,09,080/-. Furthermore, this paragraph also adverts to the fact that the assessee in the period in issue undertook transaction amounting to Rs.1,14,34,000/-. 9. The observations made in this paragraph are not aligned with the observations made by the Assessing Officer (AO) in paragraph 4 wherein interalia it is stated that the petitioner had not filed its return of income. 10. Mr Vipul Agrawal, senior standing counsel, who appears on behalf of the respondents/revenue, points out that this is perhaps an inadvertent error as in the notice issued under Section 148A(b) of the Act there is no such assertion. 11. We may also note that the petitioner concededly did not file a reply to the notice dated 04.03.2023 issued under Section under Section 148A(b) of the Act. 12. Counsel for the petitioner says that the petitioner has an explanation for the transaction that has been flagged in the order dated 24.03.2023 issued under Section 148A(d) of the Act. 13. We may note that the charge levelled against that petitioner is that it has entered into fictitious purchase transaction with an entity going by the name of M/s Krishna Traders and it is this transaction which has been quantified at Rs. 1,14,34,000/-. 14. In our view, the best way forward would be to set aside the impugned order dated 24.03.2023 passed under Section 148A(d) of the Act and allow the AO to pass a fresh Digitally Signed By:NEELAM SHARMA Signing Date:24.06.2023 14:50:11 Signature Not Verified

W.P.(C) 7697/2023

Pg. 3 of 3 order after giving opportunity to the petitioner to file a reply to the notice dated 04.03.2023 issued under Section 148A(b) of the Act. 15. This direction we are issuing because the error prove to be fatal for both sides if the order is allowed to remain on record given the contradiction between what is stated in paragraph 2.1 and paragraph 4 of the said order. 16. Accordingly, order dated 24.03.2023 issued under Section 148A(d) of the Act is set aside. Resultantly, the consequential notice of even date i.e. 24.03.2023 issued under Section 148 of the Act is also set aside. 17. The petitioner will file its response to the notice dated 04.03.2023 issued under Section 148A(b) of the Act within four weeks of receipt of the copy of the judgment. 18. The AO will thereafter accord personal hearing to the authorized representative of the petitioner. For this purpose, the AO will issue a notice to the petitioner whereby the date and time of hearing will be indicated. 19. Needless to say that the AO will pass speaking order, copy of which will be furnished to the petitioner. 20. Consequently, the pending application shall stand closed. 21. We make it clear that the fact that we have set aside the order dated 24.03.2023 passed under Section 148A(d) of the Act will not impact the merits of the case. 22. Parties will act based on the digitally signed copy of the order.

(RAJIV SHAKDHER) JUDGE

(GIRISH KATHPALIA) JUDGE

MAY 30, 2023

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Digitally Signed By:NEELAM SHARMA Signing Date:24.06.2023 14:50:11 Signature Not Verified

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