Mukesh J. Ruparel Vs ITO (Bombay High Court)
Summary: The Bombay High Court quashed the reassessment-related proceedings against Mukesh J. Ruparel for Assessment Year 2016-17 after finding multiple defects in the statutory process preceding issuance of the notice under Section 148A (b) of the Income Tax Act, 1961. The petitioner, an individual who had not filed a return because his income was below the taxable limit, challenged a notice dated 15th March 2023, the order dated 31st March 2023 under Section 148A(d), and the consequent notice under Section 148.
The first and decisive defect concerned the time allowed to respond. The notice dated 15th March 2023 required the petitioner to show cause by 20th March 2023, effectively allowing only five days. The Court reproduced Section 148A(b), which requires a period of not less than seven days and not more than thirty days from the date of issue, and referred to the guidelines dated 1st August 2022. The Court held that the minimum seven-day period was a mandatory requirement and that failure to comply rendered the notice invalid.
The Court also found that the approval under Section 151 annexed to the impugned order related to another assessee, Poonam Vijay Chhabria, and carried a different PAN. This was treated as an indication of non-application of mind. The Court further noted that the order under Section 148A(d) did not state the amount of income alleged to have escaped assessment, although the guidelines contemplated specification of the quantum of escaped income, assets, expenditure or entry.
Another factual defect concerned the affidavit of the petitioner’s brother. The petitioner had supplied a notarized affidavit stating that his brother had gifted Rs.75 lakhs on 26th March 2019, a date much later than the relevant Assessment Year. The impugned order incorrectly stated that the affidavit had not been notarized. The order also stated that the HDFC statement did not substantiate the creditworthiness and genuineness of the brother in relation to the gift. The petitioner submitted that the show-cause notice had only required disclosure of the source from which he obtained money to pay for the flat, and therefore he had not been called upon to furnish evidence of his brother’s creditworthiness.
Considering these defects collectively, and having received no reply from the Revenue despite service of the petition, the Court quashed the notice dated 15th March 2023 under Section 148A(b), the order dated 31st March 2023 under Section 148A(d), and the consequent notice dated 31st March 2023 under Section 148. The petition was disposed of with no order as to costs.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
Petitioner is impugning a notice dated 15th March 2023 issued under Section 148A (b) of the Income Tax Act, 1961 (the Act), the order dated 31st March 2023 passed under Section 148-A(d) of the Act and notice dated 31st March 2023 issued under Section 148 of the Act.
2. Petitioner is an individual who did not file return of income for Assessment Year 2016-17 because his income was less than taxable limit.
3. Petitioner received a notice dated 15th March 2023 under Clause 148A(b) of the Act from Respondent No.1, stating that Respondent No.1 has information which suggests that income chargeable to tax for Assessment Year 2016-17 has escaped assessment within the meaning of Section 147 of the Act. Petitioner was provided with information/ enquiry on which reliance was placed in the form of annexure to the notice and Petitioner was called upon to show cause on or before 28th March 2023 as to why a notice under Section 148 of the Act should not be issued. The information which suggested that there has been an escapement of income from assessment provided details of a property that Petitioner had purchased. Petitioner was directed to provide head-wise computation of income, details of purchase of immovable property during Financial Year 2015-16 supported with copy of registered agreement with annexure II, details of payment made and source of acquisition of said immovable property.
4. Petitioner submitted an elaborate reply on 18th March 2023 and also raised certain objections. The main objection raised was that under the provision of Section 148A(b) of the Act, the assessee should be provided an opportunity of being heard by serving upon the assesssee a notice to show cause within such time as may be specified in the notice being not less than seven days but not exceeding thirty days from the date on which said notice has been issued. Since the notice dated 15th March 2023 provides only for five days when the law requires minimum seven days to be given, the notice itself was bad-in-law.
5. Alongwith reply, Petitioner also provided a photo copy of the notarized affidavit of Petitioner’s brother affirmed on 18th March 2023, in which the brother has confirmed of giving gift of Rs.75 lakhs to Petitioner on 26th March 2019, which is much beyond the relevant Assessment Year.
6. Respondent No.1 has passed the impugned order dated 31st March 2023 under Clause D of Section 148A of the Act. In the order, Respondent No.1 states that from the statement issued by HDFC Bank for the period 1st April 2018 to 31st March 2019 of the brother, it is seen that there is a credit entry of Rs. 1 Crore on 19th March 2019, out of which Rs. 75 lakhs has been paid to Petitioner on 26th March 2019. Respondent No.1 also states that the gift deed submitted by Petitioner from the brother has not been notarized.
7. Moreover, Respondent No.1 states that income chargeable to tax has escaped assessment without mentioning what is the amount of income that has escaped assessment. Further, the approval under Section 151 of the Act which is annexed to the impugned order is of one Poonam Vijay Chhabria whose PAN number is also entirely different from the PAN number of Petitioner. Respondent No.1 is totally silent about the objections raised by Petitioner of minimum seven days notice required.
Mr. Gandhi states that on each of these grounds not only the impugned order dated 31st March 2023 but also the notice dated 31st March 2023 itself should be quashed and set aside.
8. No reply has been filed though Petition was served more than a month ago. We have, therefore, decided to go ahead and consider the matter and dispose it since we were, prima facie, satisfied that there was merit in Petitioner’s submissions.
Section 148-A(B) of the Act reads as under:-
“ provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any,
as per clause (a).”
9. The notice dated 15th March 2023 gives time only upto 20th March 2023 to show cause. We have to note that even the guidelines dated 1st August 2022 for issuing of notice under Section 148 of the Act also provide that if the result of an enquiry/ information available suggests that income chargeable to tax has escaped assessment, the Assessing Officer shall provide an opportunity of being heard by assessee by issuing the show cause notice under Section 148A(b) of the Act and the notice shall provide between seven to thirty days time for the assessee to submit their reply. A template of the show cause notice is also annexed to the guidelines. Therefore, in view of the guidelines, we would also read that the minimum seven days required to be made as a mandatory requirement and failure to comply with would render a notice itself invalid. Therefore, on this ground alone, the notice requires to be quashed and set aside.
Perhaps, being aware of this position, Respondent No.1 has chosen not to deal with these objections raised by Petitioner in the reply to the show cause notice.
10. We also found in the said guidelines a provision that the order under Section 148A(d) of the Act shall be sent to assesssee along with the approval of the specified authority for such order under Section 148A(d) of the Act. In the case at hand, the approval that has been sent is of some other assessee and not Petitioner. This also indicates non-application of mind by Respondent No.1. On this ground also, the order dated 31st March 2023 impugned in the Petition is required to be quashed and set aside.
11. Further, in the guidelines to which is annexed a template of the order to be passed under Section 148A(d) of the Act provides for mentioning of amount escaped based on the information and how this amount is represented in the form of assets. It also provides that the Assessing Officer will specify the quantum of income/assets/ expenditure/ entry which has escaped assessment. This not stated in the order under Clause D of Section 148 of the Act. On this ground also, the said order dated 31st March 2023 is required to be quashed and set aside.
12. Further, there is a factually incorrect statement made in the order that the affidavit of Petitioner’s brother that was submitted was not notarized when it was factually a notarized affidavit.
13. Further, in the impugned order, it is stated that the HDFC statement/document do not substantiate the credit worthiness and genuineness of the lender of the gift, i.e., brother of Petitioner.
Mr. Gandhi states that if only Petitioner was called upon to submit, Petitioner would have submitted evidence towards credit worthiness of the brother because in the show cause notice issued, Petitioner was only directed to call upon to disclose the source from which he got money to pay for the flat.
In our view, therefore, on this ground also, the impugned order dated 31st March 2023 is required to be quashed and set aside.
14. Accordingly, we hereby quash and set aside the notice dated 15th March 2023 issued under clause (b) of Section 148-A of the Act, the impugned order dated 31st March 2023 issued under clause (d) of Section 148A of the Act and consequent notice dated 31st March 2023 issued under Section 148 of the Act.
15. Petition disposed. There shall be no order as to costs.
