Atul Mahavirprasad Paldecha Vs ITO (Gujarat High Court)
Summary: The Gujarat High Court allowed the writ petition challenging the order dated 31.08.2024 passed under Section 148A(d) of the Income Tax Act, 1961 and the consequential notice issued under Section 148 for AY 2018-19.
The petitioner had originally filed his return declaring total income of Rs.1,28,74,840/-. The assessment under Section 143(3) was completed on 20.04.2021 determining total income at Rs.1,82,27,809/- after making an addition under Section 56(2)(x)(b)(B).
Subsequently, information uploaded on the Insight portal alleged escapement of income on account of transactions with M/s. Tanman Jewels Pvt. Ltd. A notice under Section 148A(b) was issued on 12.08.2024 alleging bogus purchases, to which the petitioner replied on 20.08.2024. A second notice dated 24.08.2024 alleged bogus sales transactions and required a response by 28.08.2024, thereby allowing only four days.
The petitioner challenged the proceedings on the ground that Section 148A(b) mandates that the assessee be given not less than seven days to respond. The Revenue relied upon the earlier notice of 12.08.2024 and submitted that the petitioner had responded to that notice, while no response was filed to the second notice.
The High Court held that the petitioner had not been given the adequate statutory period required under Section 148A(b). The Court emphasised that the provision requires an opportunity of being heard and that the statutory minimum period could not be curtailed.
Applying the principle of audi alteram partem, the Court held that the petitioner had not been heard before the impugned order was passed. Consequently, the order passed under Section 148A(d) and the notice issued under Section 148 were held to be unsustainable.
The High Court accordingly quashed and set aside the impugned order and notice dated 31.08.2024 and remanded the matter to the respondent to comply with Section 148A(b) and pass a fresh order in accordance with law within twelve weeks from receipt of the order.
List of Cases Discussed / Relied Upon
- Commissioner of Income Tax & Ors. Vs Chhabil Dass Agarwal, (2014) 1 SCC 603 — relied upon by the Revenue in support of its objection regarding availability of an alternative statutory remedy.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned advocate Mr. Dhinal Shah for the petitioner and learned Senior Standing Counsel Mr. Karan Sanghani for the respondents.
2. Rule returnable forthwith. Learned Senior Standing Counsel Mr. Karan Sanghani waives service of notice of rule on behalf of the respondents.
3. Having regard to the controversy in a narrow compass, with the consent of the learned advocates for the parties, the matter is taken up for hearing.
4. By this petition under Articles 226/227 of the Constitution of India, the petitioner has prayed for quashing and setting aside the impugned order passed by the respondent no. 1 under Section 148A(d) of the Income Tax Act, 1961 (For Short “the Act”) dated 31.08.2024 as well as the notice dated 31.08.2024 under Section 148 of the Act for the Assessment Year 2018-19.
5. The brief facts of the case are as under :-
5.1. The petitioner is a proprietor and is inter alia engaged in the business of trading in Diamonds. The petitioner filed its return of income under Section 139(1) of the Act on 29.09.2018 declaring the total income of Rs.1,28,74,840/-.
5.2. During the course of assessment proceedings and in response to the notice issued under Section 142(1) of the Act, details of purchases and sales were submitted by the petitioner.
Thereafter the assessment process was completed and order under Section 143(3) of the Act came to be passed on 20.04.2021 whereby the total income of the petitioner was determined at Rs.1,82,27,809/- after making additions of Rs.53,52,969/- under Section 56(2)(x)(b)(B) of the Act.
5.3. Subsequent to the completion of the assessment proceedings, certain information was uploaded on the Insight portal alleging escapement of the income to the tune of Rs.1,48,05,575/- on account of bogus purchases made by the petitioner from one M/s. Tanman Jewels Pvt. Ltd. On the basis of the said information, the case of the petitioner was reopened and notice under Section 148A(b) of the Act was issued on 12.08.2024 alleging that the petitioner had entered into bogus purchase transactions. In response to the said notice, the petitioner submitted a detailed reply on 20.08.2024 denying the allegations.
5.4. Thereafter, the petitioner was again issued with notice dated 24.08.2024 under Section 148A(b) of the Act alleging bogus sales transactions with same party i.e. M/s. Tanman Jewels Pvt. Ltd. amounting to R.1,48,05,575/- and thereby directed to furnish reply by 28.08.2024. It is the case of the petitioner that the respondent allowed only four days’ time to respond to the notice, which is contrary to the minimum required statutory period of seven days as mandated under Section 148A(b) of the Act.
5.5. It is further the case of the petitioner that due to insufficient time provided, the petitioner was unable to file reply and adequately rebut the fresh allegations made in the second notice dated 24.08.2024. It is the case of the petitioner that on the basis of the aforesaid two notices, the respondent under Section 148A(d) of the Act passed an order dated 31.08.2024 alleging bogus sales of Rs.3,32,82,818/- and on the same date i.e. 31.08.2024, the respondent no. 1 issued notice under Section 148 of the Act seeking to reopen the assessment for the Assessment Year 2018-19. Therefore, the order dated 31.08.2024 passed under Section 148A(d) of the Act and notice under Section 148 of the Act are impugned in the present writ petition.
6. Learned advocate Mr. Dhinal Shah for the petitioner submitted that the respondent no. 1 has failed to give reasonable opportunity of being heard to the petitioner before passing the impugned order under Section 148A(d) of the Act. Moreover, the notice dated 24.08.2024 provided the petitioner only four days to respond which is in violation of the mandatory seven days statutory period as prescribed under Section 148A(b) of the Act. Therefore, the denial of the statutory minimum time period renders the proceedings void ab initio and violates the right of the petitioner.
6.1. Learned advocate Mr. Dhinal Shah further submitted that there are other issues distinct with regard to the allegation of bogus sales, however, prima facie issue which needs to be interfered is violation of the mandatory period of giving response.
7. Per contra, learned Senior Standing Counsel Mr. Karan Sanghani for the respondent could not controvert the submissions made by learned advocate Mr. Dhinal Shah and relied upon the affidavit-in-reply filed on behalf of the respondent on the following averments :-
“4. At the outset, I most respectfully submit that the petitioner has challenged the impugned notice dated 31.08.2024 issued under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for A.Y 2018-19 as well as the order dated 31.08.2024 passed under section 148A(d) of the Act submit that this petition is premature and there is an alternative efficacious remedy available under the law. The assessment pursuant to impugned notice is yet to be framed. In other words, the petitioner if aggrieved by the assessment order yet to be framed can file an appeal before the CIT (Appeals) and thereafter to the Appellate Tribunal. It is a settled law that the person aggrieved cannot abandon the statutory mechanism stipulated under the Act. Reliance is placed on the decision of the Hon’ble Supreme Court in the case of Chhabildas Agrawal, (357 ITR 357) Hence, on this limited ground, the challenge to the impugned notice may kindly be rejected.
5. The petitioner has contended that only 4 days time in granted to respond to Section 148A(b) notice as against the Ray 108andatory period of seven days prescribed in the statute.
In this regard, I humbly submit that notice u/s 148A(b) was issued on 12.08.2024 calling upon the petitioner to respond on or before 20.08.2024, therefore, minimum seven days were granted to the petitioner. The petitioner vide letter dated 20.08.2024 duly responded to such notice.
6. Subsequently, another notice u/s 148A(b) of the Act was issued on 24.08.2024 calling upon the petitioner to respond on or before 28.08.2024. The petitioner neither responded to such notice nor filed any adjournment. Consequently, the respondent passed an order u/s 148A(d) on 31.08.2024 and issued notice dated 31.08.2024 u/s 148 of the Act.”
7.1. Referring to the above averments, it was submitted that impugned notice issued under Section 148 of the Act is legal and therefore requested to dismiss the petition and pass appropriate order.
8. Having heard the learned counsel for the respective parties and having gone through the material placed on record, the primary case of the petitioner is that notice issued under Section 148A(b) of the Act was issued on 24.08.2024 wherein the petitioner was directed to furnish reply by 28.08.2024 which time period is less than the time stipulated under Section 148A(b) of the Act. Section 148A(b) of the Act reads as under :-
Section 148A The Assessing Officer shall, before issuing any notice under Section 148 :-
(a) xxx xxx
(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 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 suggest 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. Upon perusing the above provision, it is not in dispute that the petitioner was not given adequate time as required under Section 148A(b) of the Act, and was not heard before passing the impugned order. It is a fundamental proposition of law that the other side should be heard before any order is passed. The maxim of Audi Alteram Partem is broad enough to include the rule against bias since a fair hearing is must for it to be unbiased hearing. In the instant case, the fact is not in dispute that the petitioner was not given appropriate time to respond to the notice issued under Section 148A(b) of the Act and the impugned order was passed without hearing the petitioner. In view of the same, the impugned order passed by the respondent under Section 148A(b) of the Act as well as the notice issued under Section 148 of the Act are not tenable and the same are required to be quashed and set-aside.
10. Considering the facts of the case, the petition succeeds and is accordingly allowed. The impugned order and notice dated 31.08.2024 are hereby quashed and set aside and the matter is remanded to the respondent to comply with the provisions of Section 148A(b) of the Act and pass a fresh order after following due procedure of law.
11.. Such exercise shall be completed within twelve (12) weeks from the date of receipt of copy of this order.
12. Rule is made absolute to the aforesaid extent with no order as to costs.
