Case Law Details
Usha Rani Girdhar Vs ITO (Delhi High Court)
Primary allegation cannot be added to the SCN by issuing Supplementary Notice
The Hon’ble Delhi High Court (“the High Court”) in the case of M/s. Usha Rani Girdhar v. Income Tax Officer [W.P. (C) 16090 of 2022] dated November 25, 2022, held that Assessing officer (“the AO”) cannot add primary allegation in Notice by issuing Supplementary Notice.
Facts:
M/s. Usha Rani Girdhar (“the Petitioner”) had sold the immovable property in the Assessment Year 2017-18 and the long-term capital gain arose by such transaction was not disclosed in the Income Tax Return (“ITR”) of same period.
The AO issued a Notice to the Petitioner under Section 148A(b) of the Income Tax Act, 1961 (“the IT Act”) dated May 21, 2022 (“Notice”) by relying on information received from Income Tax Officer (“ITO”) alleging non-disclosure of long-term capital gain by the Petitioner.
Subsequently, the AO passed an Order dated July 29, 2022 under Section 148A(d) of the IT Act, (“the Order”) and the issued a SCN dated July 30, 2022 under Section 148 of the IT Act, for initiating proceeding for the Assessment Year 2017-18.
Petitioner contended that the Notice and the Order were for two different immovable properties. The Notice was for the property of Kingsway Camp, Delhi and the Order was issued for the property of Rohini Section-34, Delhi.
The Revenue (“the Respondent”) accepted the mistake of issuance of the Notice and the Order related to distinct immovable properties and prayed before the High Court to rectify mistake by issuing a Supplementary Notice under Section 148A(b) of the IT Act.
Issue:
Whether the tax authorities can issue Supplementary Notice for incorporating primary allegation which was not present in the Notice?
Held:
The High Court held that:
- Held that the intent of issuing Notice under Section 148A(b) of the IT Act is to inform the Petitioner of the allegations against him with sufficient particulars so that he can put forward his defence.
- Relied upon the case of Catchy Prop-Build Private Ltd. Vs. Assistant Commissioner of Income Tax & Anr., [2022] 448 ITR 671 (Del) and held that if the foundation allegation is missing in the notice issued under Section 148A(b) of the IT Act, the same cannot be incorporated by issuing a supplementary notice.
The High Court set aside the SCN, the Order and the Notice issued by the AO for the Assessment Year 2017-18.
Relevant Provisions:
Section 148 of the IT Act
Before making the assessment, reassessment or re-computation under section 147, and subject to the provisions of section 148A, the Assessing Officer shall serve on the assessee a notice, along with a copy of the order passed, if required, under clause (d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139:
Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice.
Provided further that no such approval shall be required where the Assessing Officer, with the prior approval of the specified authority, has passed an order under clause (d) of section 148A to the effect that it is a fit case to issue a notice under this section.
Section 148A(b) of the IT Act
The Assessing Officer shall, before issuing any notice under section 148,-
(b) 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);
Section 148A(d) of the IT Act
The Assessing Officer shall, before issuing any notice under section 148,-
(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. Present writ petition has been filed challenging the notice issued under Section 148 of the Income Tax Act, 1961 (‘the Act’) dated 25th June, 2021 as well as the notice issued under Section 148A(b) of the Act dated 21st May, 2022, order passed under Section 148A(d) of the Act dated 29th July, 2022 and the notice issued under Section 148 of the Act dated 30th July, 2022 for the Assessment Year 2017-18.
2. Learned counsel for the petitioner states that the order passed under Section 148A(d) of the Act and the notice issued under Section 148A(b) of the Act are on distinct and separate grounds. In support of his contention, he refers to and relies upon the notice dated 21st May 2022 issued under Section 148A(b) of the Act as well as the order dated 29th July, 2022 passed under Section 148A(d) of the Act, wherein it has been stated as under:
A) Notice dated 21st May, 2022
“As per information received from ITO Ward 35(1) it is found that the assessee has sold the property
The details of the financial transactions with respect the sale of property are as udder:-
As per information, it is found that the assessee has sold a property for the consideration of Rs. 35,00,000/-, however, circle rate cost of the property was Rs. 12,50,000/-. It is found that assessee has filed her ITR for the A.Y 2017-18 declaring income of Rs. 3,47,281/- whereas as per ITR the assessee has not declared the capital gain income on sale of above property. As per the stamp duty authority the value of the property sold by the assessee was of Rs. 12,50,000/- whereas the purchaser paid as per sale deed a consideration of Rs. 35,00,000/-.
B) Order dated 29th July, 2022
“4.
….. The gist of information provided to the assessee is as under:
“As per information received from ITO Ward 35(1) it is found that the assessee has sold the property
The details of the financial transactions with respect the sale of property are as udder:-
As per information, it is found that the assessee has sold a property for the consideration of Rs. 10,00,000/-, however, circle rate cost of the property was Rs. 22,50,000/-. It is found that assessee has filed her ITR for the A.Y 2017-18 declaring income of Rs. 3,47,281/- whereas as per ITR the assessee has not declared the capital gain income on sale of above property. As per the stamp duty authority the value of the property sold by the assessee was of Rs. 22,50,000/- whereas the purchaser paid as per sale deed a consideration of Rs. 10,00,000/-…… ”
3. He further states that the impugned proceedings for the Assessment Year 2017-18 are barred by limitation in terms of Section 149(1)(b) of the Act as the income alleged to have escaped assessment is Rs. 11,25,000/- i.e. less than Rs. 50,00,000 despite the fact that in terms of Section 149(1)(b) of the Act, proceedings can be initiated after expiry of three years from end of relevant assessment year only if, inter-alia, the amount alleged to have escaped assessment is Rs. 50,00,000/- or more.
4. Issue notice. Mr. Zoheb Hossain, learned senior standing counsel accepts notice on behalf of the respondents-revenue. He states that there has been a mistake in Section 148A(b) notice that was issued in the present instance. He states that the mistake has occurred as incomplete information had been initially forwarded to the Assessing Officer by the ITO, Ward 35(1), Delhi. He prays that the Assessing Officer be allowed to issue a supplementary or amendatory notice under Section 148A(b) of the Act incorporating the corrected details of the property.
5. Having perused the paper book and having heard the learned counsel for the parties, this Court is of the view that the Kingsway Camp property was mentioned in the notice issued under Section 148A(b) of the Act and the petitioner was never asked to explain the transaction with regard to the sale of the Rohini property. This Court finds that not only is the description of the property different in the notice issued under Section 148A(b) of the Act and the order passed under Section 148A(d) of the Act, but also the sale consideration and circle rate in both the documents are different.
6. It seems to this Court that though the Assessing Officer prior to passing the impugned order under Section 148A(d) of the Act realised that he had committed a mistake while issuing the notice under Section 148A(b) of the Act, yet he proceeded with the same and even went to the extent of wrongly stating in the Section 148A(d) order that he had issued the notice under Section 148A(b) of the Act with regard to the Rohini property instead of Kingsway Camp property.
7. A perusal of the file also reveals that the information with the Assessing Officer received from the ITO, Ward 35(1), Delhi was with regard to violation of Section 269SS of the Act and not with regard to non-declaration of long term capital gain, for which the notice had been issued. Consequently, the impugned show cause notice is contrary to the record.
8. This Court in Catchy Prop-Build Private Ltd. Vs. Assistant Commissioner of Income Tax & Anr., 2022 (10) TMI 771-Delhi High Court has held, “….. if the foundational allegation is missing in the notice issued under Section 148A(b) of the Act, the same cannot be incorporated by issuing a supplementary notice”.
9. It is further settled law that the intent behind issuing the notice under Section 148A(b) of the Act is to inform the assessee of the allegations against him/her with sufficient particulars so that he/she can put forward his/her defence. In the present instance, the assessee specifically replied to the allegation that was mentioned in the notice issued under Section 148A(b) of the Act and for this, she cannot be faulted with. On the other hand, the Assessing Officer has been negligent in incorporating the incorrect information and in not admitting the fact that he had committed a mistake while issuing a notice under Section 148A(b) of the Act even at the time of passing the order under Section 148A(d) of the Act.
10. Keeping in view the aforesaid, present writ petition is allowed and the show cause notice issued under Section 148A(b) of the Act as well as the order passed under Section 148A(d) of the Act and the notice issued under Section 148 of the Act for the Assessment Year 2017-18 are set aside. However, if the law permits, the respondents-revenue to take further steps in the matter, they shall be at liberty to do so. Needless to state that if and when such steps are taken and if the petitioner has a grievance, she shall be at liberty to take her remedies in accordance with law. Accordingly, the present writ petition along with pending applications stands disposed of.
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