SHRI VIJAY SOUHARD CREDIT SAHAKARI LTD., vs. THE INCOME TAX OFFICER

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NC: 2024:KHC-D:14160 WP No. 104442 of 2022

IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 27TH DAY OF SEPTEMBER, 2024 BEFORE THE HON'BLE MS. JUSTICE JYOTI MULIMANI WRIT PETITION NO. 104442 OF 2022 (T-IT) BETWEEN:

SHRI VIJAY SOUHARD CREDIT SAHAKARI LTD., VIJAYNAGAR, KULALI CROSS, MUDHOL, DIST: BAGALKOT-587 313, REPRESENTED BY ITS GENERAL MANAGER, SHRI. MALLAPPA.H.PATTENNAVAR, AGE: 53 YEARS, OCC: SERVICE, R/O: MUDHOL, DIST: BAGALKOT. …PETITIONER (BY SRI.SANGRAM.S.KULKARNI., ADVOCATE)

AND:

THE INCOME TAX OFFICER, WARD 1 AND TPS, BAGALKOT, AAYAKAR BHAVAN, SECTOR 24, NAVANAGAR, BAGALKOT-587 012. …RESPONDENT (BY SRI.M.THIRUMALESH AND MISS.ROOPA ANAVEKAR., ADVOCATES)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, SEEKING CERTAIN RELIEFS.

THIS WRIT PETITION IS LISTED FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, AN ORDER IS MADE AS UNDER:

Digitally signed by THEJASKUMAR N Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC-D:14160 WP No. 104442 of 2022

ORAL ORDER Sri.Sangram S.Kulkarni., counsel for the petitioner and Ms.Roopa Anavekar., counsel for the respondents have appeared in person. Sri.M.Thirumalesh., counsel for the respondent has appeared through video conferencing. 2. The short facts are these: The petitioner is Souhard Sahakari Ltd., registered under the Karnataka Souhard Act, 1997. It is entitled to claim exemption/deduction under Section 80(P) of the Income Tax Act, 1961. The petitioner filed its income tax return for the Assessment Year 2016-17 claiming a deduction under Section 80(P). The respondent issued a notice on 23.04.2021 calling upon the petitioner to file a return of income in the prescribed form within thirty days from the service of the notice as the respondent has reasons to believe that income chargeable to tax for Assessment Year 2016-17 has escaped assessment within the meaning of Section 147 of the Act. On receipt of the said notice, the petitioner filed income tax return in the prescribed form on 20.05.2021.

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NC: 2024:KHC-D:14160 WP No. 104442 of 2022

The respondent issued notice on 14.10.2021 under Section 143(2) of the Act calling upon the petitioner to furnish accounts and documents specified in the annexure to the said notice. The respondent sought information regarding the ICICI bank account and also clarification regarding total bank credit transaction to the tune of Rs.18,94,66,000/- (Rupees Eighteen Crore Ninety-Four Lakhs Sixty-Six Thousand only) during the period 2015-16. The petitioner replied to the above notice on 26.10.2021 stating that it is a Souhard Society registered under the Karnataka Souhard Act, 1997 and in order to collect various deposits like fixed deposit, savings bank from its members has maintained an account in ICICI Bank Limited and there is no income from the amount credited in ICICI Bank account. All the transactions are included in its financials and have been declared in the income tax returns. The petitioner Society filed its returns of income for Assessment Year 2016-17 on 17.10.2016 by declaring net profit of Rs.2,35,85,482/- (Rupees Two Crore Thirty-Five Lakhs Eighty-Five Thousand Four Hundred and Eighty Two only). The petitioner further stated that there is no intention of escaping the tax and that true profits have been declared in the return of income filed by the Society.

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NC: 2024:KHC-D:14160 WP No. 104442 of 2022

After submission of the reply, the respondent did not continue further with the reassessment proceedings till 26.05.2022. However, on 26.05.2022, the respondent issued a notice to the petitioner under Section 148A(b) of the Act stating that in consequence of the judgment rendered by the Hon'ble Apex Court in the case of UNION OF INDIA & OTHERS V/S ASHISH AGARWAL, the notice dated 23.04.2021 addressed to the petitioner should be treated as a show cause notice and the petitioner was called upon to submit its reply on or before 10.06.2022. The petitioner submitted its reply on 10.06.2022 stating that there is no income from the amount credited in ICICI Bank account and all the bank transactions are included in its financials and have been declared in the income tax returns. The petitioner specifically stated that all the information regarding the transactions as per AIR information supplied by ICICI Bank related to regular day to day business activities and the said amount/ transactions are already reflected in the books of accounts and declared in the return of income filed for the Assessment Year 2016-17. The petitioner also specifically stated that there is no escapement of any taxable income for Assessment Year 2016-17 which exceeds Rs.50,00,000/-

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NC: 2024:KHC-D:14160 WP No. 104442 of 2022

(Rupees Fifty Lakhs only) as per Section 149(1)(a) and 149(1)(b) of the Act and therefore, notice issued relating to Assessment Year 2016-17 is bad in law and requested to drop the proposed proceedings against the Society. However, the respondent proceeded to pass an order on 29.07.2022 under Section 148A (d) of the Act and a show cause notice under Section 148 of the Act was issued. Hence, the petitioner has filed the captioned Writ Petition under Articles 226 and 227 of the Constitution of India on several grounds as set out in the Memorandum of Writ Petition 3. Counsel Sri. Sangram Kulkarni., in presenting his arguments strenuously urged that the respondent has failed to consider the detailed reply that has been given by the petitioner from the right perspective. Hence, he submits that the matter may be remanded with an opportunity for a personal hearing. Counsel, therefore, submits that the petition may be allowed. By way of reply, counsel Sri.M.Thirumalesh., urged several contentions. He justified the action of the respondent. He vehemently objected to the remand. He submits that the

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NC: 2024:KHC-D:14160 WP No. 104442 of 2022

Writ Petition is devoid of merits and the same may be dismissed. 4. Heard the arguments and perused the Writ papers with care. 5. The grievance of the petitioner is that the respondent without considering the detailed reply, has mechanically gone ahead to pass 148A(d) order on 29.07.2022 and issued 148 Notice. The reply given by the petitioner to the 148A(b) notice is furnished along with the Writ Petition and the same is marked as Annexure-F. A perusal of the same reflects that the petitioner has given a detailed reply. However, the 148A(d) order reflects that the respondent has not considered the reply from the right perspective. Hence, the matter requires a remand. The 148A(d) order and 148 Notice are liable to be set aside, so they are set aside. 6. The Writ of Certiorari is ordered. The order dated 29.07.2022 passed by the respondent under Section 148A(d) of the Income Tax Act, 1961 in DIN & Order No: ITBA/COM/F/17/2022-23/1044281915(1) for the Assessment Year 2016-17 vide Annexure-H and the Notice

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NC: 2024:KHC-D:14160 WP No. 104442 of 2022

dated 29.07.2022 issued under Section 148 of the Income Tax Act, 1961 in DIN & Notice No: ITBA/AST/M/148_1/2022- 23/1044313790(1) for the Assessment Year 2016-17 vide Annexure-J are quashed. The matter is remanded to the respondent to the stage of giving added/additional reply to 148A(b) notice dated 26.05.2022. The respondent must provide an opportunity of a personal hearing to the petitioner and thereafter, pass orders as per the law. This Court has not expressed any opinion on the merits of the case. 7. Resultantly, the Writ Petition is allowed and remanded. Because of disposal of the Writ Petition pending interlocutory application if any stands disposed of.

Sd/- (JYOTI MULIMANI) JUDGE

TKN LIST NO.: 1 SL NO.: 53.1