Case Law Details
Jothiramalingam Sangeetha Vs ITO (Madras High Court)
Introduction: The case of Jothiramalingam Sangeetha vs. Income Tax Officer (ITO) before the Madras High Court revolves around a writ petition challenging an order issued under section 148A(d) of the Income Tax Act. The order proposed to initiate re-assessment proceedings for the Assessment Year (AY) 2015-16. The petitioner contests the order along with a show cause notice, arguing that her income was below the taxable threshold, and hence, she was not obligated to file an income tax return.
Factual Background: The petitioner claimed to have sold her land for Rs. 40 lakhs, while the market value in the sale deed was mentioned as Rs. 51 lakhs. Her contention was that after deducting the cost of acquisition and expenses related to the property transfer, the taxable income was less than the threshold, relieving her from the obligation to file an income tax return. The show cause notice from the respondent questioned the potential escapement of income for AY 2015-16.
Petitioner’s Response: In response to the show cause notice, the petitioner submitted a reply stating that she had not sold any property for Rs. 51,00,000. She argued that even if she had sold a property for that amount, the income, after deducting the cost of purchase, brokerage charges, and development costs, would be less than Rs. 50 lakhs.
Impugned Order and Jurisdictional Challenge: Despite the petitioner’s reply, the respondent issued an order under section 148(A)(d) and a notice proposing to reassess the petitioner’s income for AY 2015-16. The petitioner contested the jurisdiction of the officer, claiming that the income did not cross the Rs. 50 lakhs threshold, and thus, the officer had no authority to issue the order and notice.
Legal Analysis: The court analyzed section 149(1) of the Income Tax Act, emphasizing that if the income chargeable to tax is Rs. 50 lakhs or more, the Assessing Officer has jurisdiction to issue a notice under section 148. The court clarified that the petitioner has the right to raise the jurisdictional issue during the section 148 proceedings, and section 149(1) allows challenging a notice issued without jurisdiction.
Court’s Decision: The court directed the petitioner to file a reply to the show cause notice, raising the jurisdictional issue and providing relevant documents within 30 days. The respondent was instructed to consider the jurisdictional matter after reviewing the petitioner’s reply and allowing a personal hearing. The writ petition was disposed of with these directions, and no costs were awarded.
Conclusion: The court’s decision highlights the importance of jurisdictional issues in income tax proceedings. It ensures that taxpayers have an opportunity to challenge notices issued without proper jurisdiction and present relevant documents supporting their claims. The case underlines the legal recourse available to taxpayers in addressing jurisdictional concerns during the assessment and reassessment processes.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
This Writ Petition is filed challenging the order dated 12.04.2022 passed under section 148A(d) of the Income Tax Act, proposing to initiate re-assessment proceedings for the AY 2015-16 and the show cause notice dated 18.03.2022 u/sec.148A(b) and also notice issued under section 148 of the Act dated 12.04.2022 proposing to reassess the income of petitioner for the AY 2015-16.
2. The case of the petitioner is that she has sold her land for a sum of Rs.40 lakhs, however, the market value of the property has been shown in the sale deed as Rs.51 lakhs. Therefore, the income chargeable to tax after deduction of cost of acquisition and expenses in connection with transfer of the property was less than the taxable income, hence, there was no obligation for the petitioner to file return of income. However, the respondent issued a show cause notice dated 18.03.2022 under section 148A of the Income Tax Act (hereinafter referred to as ‘Act’) calling for the petitioner to show cause as to why not the income chargeable to tax for the AY 2015-16 be treated as escaped income.
2.1 In reply to the show cause notice, the petitioner filed a reply dated 24.03.2022 stating that she has not sold any property for Rs.51,00,000/- and the petitioner’s income during the relevant assessment year is much below the maximum limit not subject to tax, hence, she has not filed the return of income u/s.139. She further stated in her reply that if she sold any property for Rs.51,00,000/-, the income out of it would definitely be less than Rs.51,00,000/- and apart from cost of purchase, two percent brokerage charges and development cost are also there, hence, at any cost, the petitioner’s income would certainly be not more than Rs.50 lakhs.
2.3 However, the respondent, without considering the reply filed by the petitioner, passed the impugned order dated 12.04.2022 under section 148(A) of the Act and proceeded to issue notice dated 12.04.2022 proposing to assess or reassess the returns of the petitioner for the AY 201516. Since the petitioner has not produced any material as proof to show the purchase of the cost of the land, improvement charges and cost inflation, the Assessing Officer passed the impugned order under section 148(A)(d) of the Act stating that the Officer concerned was satisfied that it is a fit case for issuing notice under section 148 of the Income Tax Act.
2.4 Now, the grievance of the petitioner is that the Officer, who passed the impugned order under section 148(A)(d) and impugned notice issued under section 148 has no jurisdiction.
3. The learned counsel for the petitioner submitted that in the event, if the income chargeable to tax is 50 lakhs or more, definitely, the officer concerned has jurisdiction to initiate assessment/reassessment proceedings under Section 148A on the income derived from sale of the petitioner’s property. In the present case, though the petitioner filed her reply stating that apart from cost of purchase, if the amount spent towards two percentage of brokerage charges and development cost is deducted, then, the value of the income derived chargeable would be below 50 lakhs. Therefore, the respondent has no jurisdiction to issue impugned order and impugned notice as well. However, without taking into consideration of this aspect, the impugned order came to be passed.
3.1 Further, the learned counsel submitted that with regard to the jurisdictional issue, she has not raised such issue in her reply to the show cause notice issued under section 148 of the Act. Therefore, she pleaded to set aside the impugned order as well as notice proposing to initiate assessment/reassessment proceedings on the income derived from sale of the petitioner’s property for the AY 2015-16.
4. On the other hand, the learned Senior Standing Counsel appearing for the respondent would submit that had the petitioner furnished all the relevant documents and particulars supporting her claim, the Officer concerned would have considered the request of the petitioner, since, she has not filed any particulars, the impugned order came to be passed. He further contended that with regard to the jurisdictional issue, still the petitioner is having an opportunity to raise the same before the authorities concerned by way of filling reply by producing all the documents, which she has failed to do so. Therefore, he submitted that the petitioner may be directed to file her reply to the impugned order and show cause notice issued respectively under section 148 (A)(d) and 148 of the Act 12.04.2023, in which case, the grievance of the petitioner would be considered by the authorities in accordance with law.
5. I have given due consideration to the submissions of the learned counsel for the petitioner as well as learned Standing counsel appearing for the respondent and also perused the materials available on record.
6. Now, the issue to be decided in the present case is as to whether the petitioner can raise the jurisdictional issue before the officer, who issued notice under section 148 of the Act.
7. At this juncture, it would be apposite to extract the provisions of section 149(1) of Income Tax Act, which reads as under :-
‘149.(1) No notice under section 148 shall be issued for the relevant assessment year,-
(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);
(b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income chargeable to tax, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more for that year;’
8. A reading of the above section would show that in the event if the income chargeable to tax is 50 lakhs or more, the Assessing Officer has jurisdiction to issue the notice under section 148 of the Act. Further, the section 149 start with the terms ‘no notice under section 148 shall be issued for the relevant assessment years‘ which means in the event, if any notice is issued, without jurisdiction, still by referring section 149(1) of the Act, the petitioner can take a stand that the notice has been issued without any jurisdiction. Further, the petitioner can also raise the issue that her income did not cross 50 lakhs or more in the sale transaction.
9. Therefore, it is not that the petitioner will not have any opportunity to raise the jurisdiction issue in the Section 148 proceedings. The said aspect is also fairly accepted by the learned counsel for the respondent stating that the petitioner will have the opportunity to raise the jurisdictional issue by way of filing reply to the above show cause notice. Even though the petitioner has not furnished any details with regard to the cost of the property plus improvement made therein etc., in the event, if she furnishes those particulars along with relevant documents supporting her claim, the Assessing Officer will take a stand whether the notice issued by him is within the jurisdiction or not.
10. In such view of the matter, this court is inclined to pass the following order:-
(a) The petitioner is directed to file reply to the show cause notice issued under section 148 of the Act, raising issue on jurisdiction along with the relevant documents in support of her claim within a period of 30 days from the date of receipt of a copy of this order.
(b) Thereafter, the respondent is directed to consider the jurisdictional issue with regard to the notice under section 148 of the Act after taking into consideration the reply filed by the petitioner and after affording an opportunity of personal hearing.
11. In the result, the Writ Petition is disposed of with the above direction. No costs. Consequently, the connected miscellaneous petition is also closed.
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