RTPL Marketing Private Limited Vs ITO (Delhi High Court)
Introduction: In the case of RTPL Marketing Private Limited vs. Income Tax Officer (ITO), the Delhi High Court has directed re-adjudication for Assessment Year 2019-20. The matter revolves around an alleged suspicious sale transaction of khadi yarn worth Rs. 31,00,000. The Court’s decision underscores the need to verify additional documents and examines the importance of proper assessment in taxation.
Detailed Analysis: The core issue in this case pertains to Assessment Year 2019-20. The petitioner, RTPL Marketing Private Limited, is under scrutiny due to a sale transaction it engaged in with Sethi International, a proprietorship concern. The transaction involves the sale of khadi yarn with a claimed value of Rs. 31,00,000.
The Income Tax Department has raised concerns about the verifiability of this transaction, primarily because the proprietor of Sethi International, Mr. Manjeet Singh, did not file his Income Tax Return (ITR) for the relevant assessment year.
The case was initially heard in July 2023, where the Court was apprised of the situation and the sequence of events. The petitioner provided responses to the notice issued under Section 148A(b) of the Income Tax Act. They asserted that the sale of goods worth Rs. 31,00,000 was made to Sethi International, supported by invoices and transporter receipts. However, it was highlighted that the transporter receipts lacked a G.R. Number, which raised concerns.
During this hearing, the petitioner clarified that they were not the manufacturer of khadi yarn, raising further questions about the supply chain.
As a result, the Court directed the petitioner to submit supplier’s invoices and supporting documents within two weeks for the Court’s review, with copies provided to the respondent’s counsel. The matter was scheduled for a subsequent hearing.
Following this direction, the petitioner presented additional documents, which included invoices and documents related to the movement of khadi yarn from the petitioner to Sethi International.
However, the respondent contended that these documents were not available to the Assessing Officer (AO) during the initial assessment. Despite this, the petitioner claimed that the consideration received from the sale of khadi yarn had already been subjected to tax, rendering the issue of Sethi International’s existence irrelevant.
The Court, considering the new documents and the petitioner’s claim, decided that the most appropriate course of action would be to have the AO re-examine the documents and reach a definitive conclusion. The petitioner’s assertion that the tax had been collected was a significant factor in this decision.
The AO was directed to pass a fresh order, taking into account the submitted documents, providing a personal hearing to the petitioner’s authorized representative, and delivering a detailed, written order. The writ petition was disposed of in these terms.
Conclusion: The Delhi High Court’s directive for re-adjudication in the RTPL Marketing Private Limited case underlines the significance of a thorough and proper assessment process in tax matters. The need to verify additional documents and ensure a fair examination of facts and claims is evident. The Court’s decision emphasizes the importance of ensuring that tax assessments are well-founded and based on comprehensive evidence.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Before proceeding further, we may note that a typographical error has crept in paragraph 9 of the order dated 12.07.2023 passed by this court.
1.1. In the aforesaid paragraph, the date of the order passed under Section 148A(d) of the Income Tax Act, 1961 [in short, “Act”] has been noted as 25.03.2023, whereas the correct date is 27.03.2023.
2. The order dated 12.07.2023 shall stand corrected to that extent. All other parts of the order dated 12.07.2023 will remain unaltered
3. This writ petition concerns Assessment Year (AY) 2019-20.
4. The principal allegation against the petitioner is that the purported sale transaction that it entered into with Sethi International, a proprietor concern, is not verifiable. The value of the transaction has been pegged at Rs.31, 00,000/-.
5. According to the respondent/revenue, the proprietor of Sethi International, one Mr Manjeet Singh, has not filed his Return of Income (ROI) in the AY in issue, i.e., AY 2019-20.
6. This matter was listed before the court for the first time on 12.07.2023 wherein, after hearing the learned counsel for the parties for a brief while, we recorded the following broad facts:
“2. This writ petition concerns Assessment Year (AY) 2019-20.
3. The reassessment proceeding has been initiated against the petitioner/assessee on account of suspicious transactions flagged by the concerned bank, i.e., Punjab National Bank (PNB).
4. In the period in issue, i.e., AY 2019-20, Rs.31,00,000/- was found credited in the subject bank account.
5. Accordingly, a notice dated 13.03.2023 was issued under Section 148A(b) of the Income Tax Act, 1961 [in short, “Act”].
6. The petitioner responded to the said notice via reply dated 16.03.2023.
7. The stand that the petitioner took was that it had sold goods worth Rs.31,00,000/- to an entity going by the name, Sethi International.
8. Sethi International, concededly, is a proprietorship concern of, one, Mr Manjeet Singh.
9. The Assessing Officer (AO), after considering the reply and the material on record, passed an order dated 25.03.2023 [sic : 27.03.2023] under Section 148A(d) of the Act.
10. To be noted, with the reply, the petitioner had furnished copies of invoices, as well as the transporters receipts.
11. The record reveals that the petitioner has sold khadi yarn to Sethi International.
12 Mr Sunil Agarwal, learned senior standing counsel, who appears on behalf of the respondent/revenue, points out that the transporters receipts do not provide the G.R. Number.
13. According to Mr Agarwal, this is a serious lacuna in the transporter receipts, and would thus require further enquiry by the AO in the course of the assessment proceedings.
14. On being queried, Mr Gautam Jain, who appears on behalf of the petitioner/assessee, says that the petitioner/assessee is not a manufacturer of khadi yarn.
15. We would, therefore, like Mr Jain to place on record the supplier’s invoices, and the attendant documents via which supplies were received.
15.1 The documents will be placed on record within two (2) weeks. Copies of the same will be furnished to Mr Agarwal.
16. List the matter on 24.08.2023.”
7. Pursuant to the hearing held on 12.07.2023, Mr Gautam Jain, who appears on behalf of the petitioner, has filed certain additional documents, which includes invoices and documents seeking to establish the movement of the goods in issue, i.e., khadi yarn, from the petitioner to the purchaser, which, as indicated on 12.07.2023, is a proprietorship concern going by the name Sethi International.
8. Mr Sunil Agarwal, learned senior standing counsel, who appears on behalf of the respondent/revenue, submits that these documents were not made available to the Assessing Officer (AO) at the relevant point in time.
9. According to us, since these documents have emerged, the best way forward would be to have the AO examine the same and reach a definitive conclusion. The reason that we are inclined to move in this direction is on account of the fact that the petitioner claims that the consideration received on the sale of khadi yarn to Sethi International has already been offered to tax.
9.1. In other words, it is the submission of Mr Jain that the tax having been collected, the aspect concerning the existence of Sethi International loses its significance.
10. In our view, this aspect can be examined by the AO while passing a fresh order.
11. Accordingly, the impugned order dated 27.03.2023 is set aside.
11.1. Liberty is, however, granted to the AO to pass a fresh order.
11.2 The AO while passing a fresh order will take into account the documents that have been filed before us.
11.3 The AO will also accord personal hearing to the authorized representative of the petitioner.
11.4 Needless to add, the AO will pass a speaking order; a copy of which will be furnished to the petitioner.
12. The writ petition is disposed of, in the aforesaid terms.
13. Consequently, the pending interlocutory application shall stand closed.
14. Parties will act based on the digitally signed copy of the order.
