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

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WP/104559/2022HC KarnatakaKAHC02013393202227 September 2024Bench: JYOTI MULIMANI7 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the petitioner's grievance that the respondent (ITO) passed the Section 148A(d) order and issued the Section 148 notice without considering the detailed reply was valid. A perusal of the reply (Annexure-F) indicated it was detailed, but the Section 148A(d) order (Annexure-H) suggested the ITO had not considered it from the right perspective. Consequently, the Court found that the matter required a remand. The order dated July 26, 2022, under Section 148A(d) and the notice dated July 26, 2022, under Section 148 were quashed. The matter was remanded to the respondent to the stage of giving an added/additional reply to the Section 148A(b) notice. The respondent was directed to provide an opportunity for a personal hearing to the petitioner before passing orders as per law. The Court explicitly stated it had not expressed any opinion on the merits of the case.

What were the facts?

The petitioner, Shri Vijay Souhard Credit Sahakari Ltd., a cooperative society registered under the Karnataka Souhard Act, 1997, filed its income tax return for Assessment Year 2013-14, claiming deduction under Section 80(P). The Income Tax Officer (ITO), Ward 1 and TPS, Bagalkot, issued a notice under Section 147 on June 30, 2021, believing income had escaped assessment. Subsequently, on May 24, 2022, a notice under Section 148A(b) was issued, treating the earlier notice as a show cause notice, referencing the Supreme Court's decision in Union of India & Others v. Ashish Agarwal. The petitioner replied on June 8, 2022, detailing a Rs. 1,47,44,784/- credit from Shri Renuka Mata Multi-state Urban Co-op. Credit Society Ltd. The ITO passed an order under Section 148A(d) on July 26, 2022, deeming the amount as income under Sections 68 and 69A due to lack of details regarding its source. A notice under Section 148 followed.

What were the issues?

1. Whether the respondent-Income Tax Officer (ITO) failed to consider the detailed reply submitted by the petitioner from the correct perspective, necessitating a remand? (Question of mixed law and fact, concerning the application of principles of natural justice and proper consideration of evidence under Sections 147, 148, and 148A of the Income Tax Act, 1961). Assessee's Contention: The petitioner argued that the ITO did not consider its detailed reply properly and requested the matter be remanded with an opportunity for a personal hearing. The petitioner relied on the principle that a detailed reply should be considered from the right perspective. Revenue's Contention: The revenue's counsel justified the ITO's actions, objected to a remand, and argued that the Writ Petition was devoid of merits and should be dismissed.

Which sections of the Income-tax Act were involved?

Section 80(P),Section 147,Section 148,Section 148A,Section 148A(b),Section 148A(d),Section 68,Section 69A

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC-D:14161 WP No. 104559 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. 104559 OF 2022 (T-IT) BETWEEN:

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 MIS. 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:14161 WP No. 104559 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 2013-14 claiming a deduction under Section 80(P). The respondent issued a notice on 30.06.2021 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 2013-14 has escaped assessment within the meaning of Section 147 of the Act. The respondent issued another notice on 29.10.2021 calling upon the petitioner to give accounts and documents

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NC: 2024:KHC-D:14161 WP No. 104559 of 2022

specified in the annexure to the said notice. The petitioner filed a reply to the notice on 10.11.2021 saying that the petitioner is a Souhard Society registered under the Karnataka Souhard Act, 1997 to provide credit facilities to its members. After submission of the reply, the respondent did not continue further with the reassessment proceedings till 24.05.2022. However, on 24.05.2022, 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 30.06.2021 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 08.06.2022. The petitioner submitted its reply on 08.06.2022 disclosing the details regarding the amount of Rs.1,47,44,784/- (Rupees One Crore Forty-Seven Lakh Forty Four Thousand Seven Hundred and Eighty-Four only) credited by Shri Renuka Mata Multi-state Urban Co-op. Credit Society Ltd., in the Axis Bank account of the petitioner bearing Account No.414010100037129 through RTGS which was paid to two

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NC: 2024:KHC-D:14161 WP No. 104559 of 2022

members of the petitioner Society. The respondent proceeded to pass an order on 26.07.2022 under Section 148A(d) of the Act by observing that in the absence of details of the nature of the source of the amount received by RTGS from Shri Renuka Mata Multi-state Urban Co-op. Credit Society Ltd., the assessee Society can be treated as a beneficiary and the same can be deemed as income under Sections 68 and 69A of the Act. The order dated 26.07.2022 is followed by a show cause notice under Section 148 of the Act dated 26.07.2022. 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 S.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.

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NC: 2024:KHC-D:14161 WP No. 104559 of 2022

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 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 26.07.2022 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.

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NC: 2024:KHC-D:14161 WP No. 104559 of 2022

6.

The Writ of Certiorari is ordered. The order dated 26.07.2022 passed by the respondent under Section 148A(d) of the Income Tax Act, 1961 in DIN & Order No: ITBA/COM/F/17/2022-23/1044087479(1) for the Assessment Year 2013-14 vide Annexure-H and the Notice dated 26.07.2022 issued under Section 148 of the Income Tax Act, 1961 in DIN & Notice No: ITBA/AST/M/148_1/2022- 23/1044126655(1) for the Assessment Year 2013-14 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 24.05.2022. 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.

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NC: 2024:KHC-D:14161 WP No. 104559 of 2022

Because of the disposal of the Writ Petition, pending interlocutory applications if any stand disposed of.

Sd/- (JYOTI MULIMANI) JUDGE TKN List No.: 1 Sl No.: 53

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