Introduction: The Rajasthan High Court recently made a significant ruling in the case of Bijendra Singh vs ITO, where it quashed an income tax notice issued under Section 148A of the Income Tax Act, 1961. The court’s decision was based on the grounds that the notice was barred by limitation. Let’s delve into the details of the case and the court’s findings.
Detailed Analysis: The petitioner, Bijendra Singh, challenged the order dated 31.03.2022, passed under Section 148A(d) of the Income Tax Act, 1961, along with the notice dated 31.03.2022 and the assessment order dated 27.03.2023 for the assessment year 2015-16. The notice alleged that income chargeable to tax had escaped assessment, and the petitioner had deposited substantial amounts in a bank account.
The petitioner responded, contesting the amount deposited and argued that the notice was barred by limitation. Despite the petitioner’s clarification that the cash transactions were only Rs. 33,62,000, the assessing authority mechanically concluded that it was Rs. 59,75,000, triggering the extended period of limitation.
During the assessment proceedings, a show cause notice was issued, treating the cash deposit as unexplained money under Section 69A read with Section 115BBE of the Act. The petitioner objected, citing lack of jurisdiction during the ongoing Section 148 proceedings.
The assessing authority passed the assessment order, rejecting the petitioner’s objections and determining the income at Rs. 15,18,900. The petitioner raised objections based on the judgment in Abdul Majeed vs. ITO but was met with the authority’s refusal to drop the proceedings.
Conclusion: The Rajasthan High Court, in line with its previous judgment in Abdul Majeed’s case, held that the notice under Section 148A was barred by limitation. The court observed that the assessing authority, despite the petitioner’s clarifications, erroneously proceeded with the notice, and subsequent proceedings lacked jurisdiction. Consequently, the court quashed the notice dated 17.03.2022 and all consequential proceedings, including the assessment order.
This ruling reaffirms the importance of strict adherence to statutory timelines in initiating income tax proceedings and highlights the need for authorities to accurately assess relevant facts before issuing notices.
FULL TEXT OF THE JUDGMENT/ORDER OF RAJASTHAN HIGH COURT
1. This writ petition has been filed by the petitioner aggrieved of the order dated 31.03.2022 passed under Section 148A(d) of the Income Tax Act, 1961 (‘the Act of 1961’), the notice dated 31.03.2022 issued under Section 148 of the Act of 1961 and consequential assessment order dated 27.03.2023 passed for the assessment year 2015-16.
2. It is inter-alia indicated that the petitioner was issued a notice under Section 148A(b) of the Act of 1961 inter-alia indicating that the information annexed with the notice suggest that income chargeable to tax for the assessment year 2015-16 has escaped assessment under the meaning of Section 147 of the Act of 1961.
3. The annexure to the notice disclosing information inter-alia indicated that the petitioner had deposited cash of Rs.10,00,000/-or more in the same bank account amounting to Rs.33,62,000/-. It was further indicated that cash amounting to Rs.2,00,000/- or more was deposited to the tune of Rs.26,13,000/- during the said assessment year in Punjab National Bank.
4. The petitioner filed reply to the show cause notice (Annexure-2) inter-alia indicating that during the year 2015-16, a sum of Rs.33,62,000/- was deposited in cash and not Rs.59,75,000/- and as the amount was less than Rs.50,00,000/-, the extended period of limitation available under Section 149(1) (b) of the Act of 1961 was not available and therefore, the proceedings be dropped.
5. The assessee also enclosed the statements of account of his bank accounts indicating the said cash transactions. The Assessing Authority passed the order under Section 148A(d) of the Act on 31.03.2022 (Annexure-3) inter-alia rejecting the contentions of the petitioner and found the same to be a fit case for issuance of notice under Section 148 of the Act of 1961. A notice under Section 148 of the Act of 1961 (Annexure-4) was issued on the same day.
6. Pursuant to the said notice, the assessment proceeded and on 06.03.2023 (Annexure-4A) after considering the submissions made, the authority show caused the petitioner indicating that why the cash deposited to the tune of Rs.33,62,000/- in the bank be not treated as unexplained money of the assessee and he was asked to show cause under Section 69A read with Section 115BBE of the Act of 1961.
7. To which show cause notice, a response was filed by the petitioner, which ultimately resulted in passing of the assessment order dated 27.03.2023 (Annexure-4C) by the Assessing Authority.
8. The petitioner raised objections about maintainability of the proceedings relying on judgement in Abdul Majeed vs. ITO: CWP No.7853/2022, decided on 29.06.2022 by this Court. However, the authority indicating lack of jurisdiction to question the validity of the proceedings under Section 148A of the Act of 1961, refused to drop the proceedings and consequently determined the income of the petitioner at Rs.15,18,900/-.
9. Though, initially petition was filed questioning the validity of the order passed under Section 148A(d) of the Act of 1961. However, as assessment order under Section 148 of the Act of 1961 was passed during pendency of the petition, the petition was permitted to be amended qua the said orders to be questioned by the petitioner.
10. Learned counsel for the petitioner made submissions that the show cause notice was issued on the premise that the cash transactions of the petitioner were about Rs.50,00,000/- and extended period of limitation was invoked. However, as admittedly, it was found that the transactions were only of Rs.33,62,000/-, the issuance of notice itself is wholly without jurisdiction being barred by limitation and the authority while passing the order under Section 148(d) of the Act of 1961 could not have found it a fit case for issuance of notice under Section 148 of the Act of 1961.
11. Further submissions have been made that the trigger for the purpose of initiating the proceedings against the petitioner has been alleged unexplained money deposited and the notice was issued under Section 148A of the Act of 1961 and during those proceedings the issuance of show cause notice purportedly under Section 69A read with Section 115BBE of the Act of 1961 is wholly baseless as independent of Section 148A of the Act of 1961 the powers could not have been invoked by the authorities and, therefore, the entire exercise of issuance of notice under Section 148A of the Act of 1961 upto passing of the assessment order under Section 148 of the Act of 1961, deserves to be quashed and set aside.
12. Reliance has been placed on judgement passed in the case of Abdul Majeed (supra).
13. Learned counsel appearing for the respondent made submissions that once the order of the assessment was issued, the petitioner is to avail the alternate remedy. However, submissions have been made that it has been found as a fact that the petitioner could not explain cash transactions to the tune of Rs.15,00,000/- and therefore, no case for interference is made out. However, it is not denied, based on the orders passed by the authorities, that the cash transactions were amounting to Rs.33,62,000/- only.
14. We have considered the submissions made by learned counsel for the parties and perused the material available on record.
15. The facts are not in dispute, wherein, the notice under Section 148A of the Act of 1961 for assessment year 2015-16 was issued on 17.03.2022 i.e. by revoking the extended period of limitation purportedly on the ground that the cash transactions were amounting to Rs.59,75,000/-.
16. The petitioner promptly responded to the said notice by specifically indicating that the sum of cash transactions was Rs.33,62,000/- only i.e. less than Rs.50,00,000/- and as the notice was issued after three years from the assessment year, the same was barred by limitation.
17. The order under Section 148A(d) of the Act of 1961, on the said aspect reads as under:
“As per the specific information assessee deposited cash of Rs. 26,13,000/- and 33,62,000/- in Punjab National Bank. As per specific information assessee is cash deposit of Rs. 26,13,000/- in Punjab National Bank, above information uploaded by TAN(JPR02089D) and assessee is also cash deposit of Rs. 33,62,000/- in Punjab National Bank above information uploaded by TAN(DELP09943D) As per reply filed by assessee and material available on record assessee total amount deposited in cash or Rs. 59,75,000 during the financial year 2014-15. Therefore, total income of Rs. 59,75,000 left from escape the assessment for assessment year 2015-16. Thus it is logical to conclude that the assessee has no proper explanation with respect to the above mentioned escapement of income in his case for AY 2015-16.”
18. A perusal of the above would reveal that the authority despite the specific indications made by the petitioner, without application of mind and in a wholly mechanical manner came to the conclusion that the amount deposited in cash was Rs.59,75,000/- and consequently, found it a fit case under section 148 of the Act of 1961.
19. During the pendency of assessment proceedings pursuant to notice under Section 148 of the Act of 1961, a show cause notice dated 06.03.2023 (Annexure-4A) was issued to the petitioner inter-alia observing as under:
“Thus in the light of the above reasons, you are showcaused as to why the cash deposited to the tune of Rs. 33,62,000 in the Bank shouldn’t be treated as unexplained money of the assessee under section 69Arws115BBE of the IT Act and taxed accordingly as assessee has failed to disclose with documentary evidence the source of the cash deposited in the bank account 261800010002577 in PNB.”
20. It would seem that the assessing authority accepted the plea of the petitioner regarding the cash deposits of Rs.33,62,000/-only. However, choose to issue a show cause notice purportedly under Section 69A read with Section 115BBE of the Act of 1961 to the petitioner, to which the petitioner filed response and raised objections about the jurisdiction to proceed further in the matter/issue show cause notice during pendency of the proceedings under Section 148 of the Act of 1961.
21. However, the assessment order dated 27.03.2023 (Annexure-4C) was issued, wherein, the authority on the law cited by the petitioner in the case of Abdul Majeed (supra) observed that he had no jurisdiction to come to a conclusion based on the said judgement and determined the total income as Rs.15,18,900/-.
22. From the above it is apparent that though the notice was issued on the assumption that the cash deposits were Rs.59,75,000/- by invoking extended period of limitation, as a fact, it was found that the same was Rs.33,62,000/- only and once, the said aspect was clear to the authority, the authority lost its jurisdiction to further continue with the proceedings as the limitation under Section 149(1)(a) of the Act of 1961 of three years would trigger and the authority would lose the jurisdiction on account of limitation, as the amount was less than Rs.50,00,000/-.
23. However, the authority while passing the order under Section 148A(d) of the Act of 1961, in a wholly mechanical manner rejected the plea and proceeded to issue notice under Section 148 of the Act of 1961. Where after, proceedings were sought to be converted into notice under Section 69A read with Section 115 BBE of the Act of 1961, which action also is wholly impermissible. Once the notice under Section 148A of the Act of 1961 is found to be barred by limitation, no further proceedings could be initiated under any of the provisions of the Act of 1961 and the purported exercise of jurisdiction pursuant to notice under Section 148A of the Act of 1961 could not be initiated or proceeded with.
24. A Co-ordinate Bench of this Court in the case of Abdul Majeed (supra) inter-alia laid down as under:
“On conjoint reading of the provisions contained in Section 148A of the Act and what has been provided under Section 149 of the Act, it is vividly clear that in order to initiate proceedings under Section 148A of the Act, it is not enough that in case where notice is proposed to be issued under Section 148 of the Act after three years have elapsed from the end of the relevant assessment year that there should exist material available on record to reach to conclusion that some income chargeable to tax has escaped assessment, but the amount should be more than Rs.50,00,000/-. Only on the basis that the cash deposits of Rs.19,39,000/- chargeable to tax have escaped assessment, without anything more, the authority was not justified in jumping to the conclusion that the assessee may have more bank accounts. If such an interpretation is placed on the provision of Section 148A(d) of the Act with reference to expression ‘material available on record’, then in that case, it will open flood gate and even without availability of any material, the authority would be initiating proceedings under Section 148 of the Act, which will completely frustrate the object of incorporation of Section 148A in the Act. It is well settled principle of interpretation that the taxing statute is required to be construed strictly. The interpretation as has been suggested by the learned counsel for the revenue cannot be placed upon the expression ‘material available on record’ to include possibility of collection of any relevant or tangible material for opening of proceedings under Section 148A of the Act.”
25. In view of above discussion and following the dictum of this Court in case of Abdul Majeed (supra), the action of the respondent being barred by limitation cannot be sustained.
26. Consequently, the writ petition filed by the petitioner is allowed. The show cause notice dated 17.03.2022 issued under Section 148A(b) of the Act of 1961 (Annexure-1) and all consequential proceedings and assessment order are quashed and set aside.