Case Law Details
Mahesh Kumar Verma Vs Union of India And 3 Others (Allahabad High Court)
In the case of Mahesh Kumar Verma vs Union of India and Others, the Allahabad High Court addressed the validity of a reassessment notice issued under Section 148 of the Income Tax Act, 1961 (“the Act”). The petitioner, Mahesh Kumar Verma, challenged the legality of the notice and subsequent orders related to the assessment year 2017-18.
Background and Arguments
The dispute arose when the Income Tax Department received information regarding unaccounted cash deposits in the bank accounts of Mahesh Kumar Verma, allegedly made by several entities including M/s Himani International, M/s Bhawani Trading Co., M/s V N Trading Co., and M/s Olivia Tradelinks India Pvt. Ltd. Based on this information, a reassessment proceeding was initiated under Section 148 of the Act.
Mahesh Kumar Verma contended that while he provided explanations for transactions related to M/s Olivia Tradelinks India Pvt. Ltd., he disputed any involvement with cash deposits from this entity into his bank account. He argued that all his bank transactions had already been scrutinized during the original assessment for the relevant year, and no new material suggested income had escaped assessment.
Court’s Observations and Decision
- Incomplete Information: The High Court noted that the reassessment notice was primarily based on cash deposits from M/s Olivia Tradelinks India Pvt. Ltd. However, crucial information regarding transactions facilitated by M/s Agarwal Bullion was not provided to Mahesh Kumar Verma before issuing the notice. This omission denied him the opportunity to effectively rebut the allegations related to these transactions.
- Non-Compliance with Section 148A: Section 148A of the Act requires that the taxpayer be provided with complete and relevant information before initiating reassessment proceedings. The court found that due to the failure to disclose all relevant information, the notice issued under Section 148A(b) of the Act on February 29, 2024, was incomplete and therefore invalid.
- Principle of Natural Justice: Upholding the principles of natural justice, the court emphasized that Mahesh Kumar Verma should have been given an opportunity to respond to all material allegations against him. The failure to disclose information regarding transactions through M/s Agarwal Bullion deprived him of this opportunity.
- Scrutiny Assessment vs. Reassessment: Since Mahesh Kumar Verma had already undergone scrutiny assessment for the assessment year in question, wherein he claimed to have disclosed all relevant bank transactions, the court found it necessary for the Income Tax Department to thoroughly consider these aspects before initiating reassessment proceedings.
Court’s Decision
Based on these observations, the Allahabad High Court set aside the order dated March 27, 2024, which was issued under Section 148A(d) of the Act. The court directed the Income Tax Department to provide Mahesh Kumar Verma with the complete information regarding the transactions involving M/s Agarwal Bullion. It allowed Mahesh Kumar Verma to file further objections within two weeks, following which the Income Tax Department was instructed to pass a fresh order under Section 148A(d) of the Act, considering all objections raised by him.
Conclusion
In conclusion, the case of Mahesh Kumar Verma vs Union of India underscores the importance of procedural fairness in income tax reassessment proceedings. The court’s decision highlights the requirement for tax authorities to provide taxpayers with complete and accurate information before initiating reassessment, ensuring that the principles of natural justice are upheld throughout the process.
FULL TEXT OF THE JUDGMENT/ORDER OF ALLAHABAD HIGH COURT
1. Heard Sri Kishore Kunal along with Ms. Parinita Gupta, learned counsel for the petitioner, Sri Gaurav Mahajan, learned counsel for Income Tax Department and Sri Manu Ghidyal, learned counsel for the revenue.
2. Present petition has been filed for following relief:
“(i) Issue a writ, order or direction in the nature of certiorari or any other appropriate writ, order or direction quashing the Impugned Notice u/s 148A (b) of the Act dated 29.02.2024 (Annexure 1), Impugned Order u/s 148A (d) of the Act dated 27.03.2024 (Annexure 2) and Impugned Notice u/s 148 of the Act dated 27.03.2024 (Annexure 3) issued/passed by respondent no. 3 for A.Y. 2017-18.”
3. Submission is that information was received by the revenue of unaccounted cash entries made in the bank accounts of the petitioner by the entities M/s Himani International, M/s Bhawani Trading Co., M/s V N Trading Co. and M/s Olivia Tradelinks India Pvt. Ltd.
4. While the petitioner offered explanation with respect to each of the above four depositors, reassessment proceeding have been drawn up solely on the strength of information received with respect to deposits made by M/s Olivia Tradelinks India Pvt. Ltd. With respect to that, it is the petitioner’s case that he had disputed any transaction performed by M/s Olivia Tradelinks India Pvt. Ltd. involving deposits of any cash by that entity in the petitioner’s bank account. It was further case that all bank transactions of the petitioner had been examined in the scrutiny assessment proceeding for the A.Y. 2017-18.
5. Therefore, no material existed to suggest that any income has escaped assessment at the hands of the petitioner.
6. In such submissions made, we had made the following observations in our last order passed yesterday:
“2. Limited dispute exists, if any information has been received by the Revenue Authority of Rs.1,44,87,500/- received by the petitioner in its bank account from M/s Olivia Tradelinks India Pvt. Ltd. during the F.Y. 2016-17.
3. At present, that fact is not very clear from the reading of the notice issued under Section 148(A)(b) and the order passed under Section 148 (A)(d) of the Act.”
7. Today, Sri Manu Ghidyal, learned counsel for the revenue has obtained written instructions. Those have been marked as ‘X’ and retained on record. Relying on the written instructions, Sri Manu Ghidyal, learned counsel for the revenue would submit that there was survey in the case of M/s Olivia Tradelinks India Pvt. Ltd. and other entities (not involving the petitioner). In that information had been received, that money has been brought by M/s Olivia Tradelinks India Pvt. Ltd to the petitioner’s bank account through M/s Agarwal Bullion.
8. Yet, that vital information was not furnished to the petitioner. By means of a notice issued dated under Section 148A (b) of the Act dated 29.02.2024, the only information furnished to the petitioner was with respect to cash deposits received in his bank account from M/s Olivia Tradelinks India Pvt. Ltd. The other receipts with respect to which notice was issued are not disputed by the revenue. To that extent, the explanation furnished by the petitioner has found acceptance.
9. Since, the petitioner was not confronted with the information that he had received cash deposits from M/s Agarwal Bullion, the petitioner was not granted opportunity to rebut the same. Seen in that light, it appears that due compliance of Section 148A of the Act has not been made, inasmuch as the notice issued to the petitioner under Section 148A (b) of the Act dated 29.02.2024, was not complete.
10. In view of the fact that the petitioner has earlier faced scrutiny assessment for the same assessment year, wherein he claims to have disclosed all bank accounts with respect to which reassessment has been drawn, we consider it desirable that appropriate consideration be first made to the material aspects noted above before the fruitful reassessment proceeding may arise to the petitioner.
11. Accordingly, the order dated 27.03.2024 is set aside.
12. Copy of the instructions received by Sri Manu Ghidyal, learned counsel for the revenue has been made over to learned counsel for the petitioner during course of hearing, today. Accordingly, the petitioner may file his further objections to the notice dated 29.02.2024 within a period of two weeks. Thereafter, the appropriate authority may pass fresh order under Section 148A (d) of the Act dealing with the further objection that may be raised by the petitioner. Reassessment proceeding, if any, may arise accordingly.
13. The writ petition is disposed of, accordingly.
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