Introduction: The legal landscape often witnesses intricate cases that test the nuances of taxation laws, and the matter of Champa Impex Private Limited vs. Union of India and Others, as adjudicated by the Calcutta High Court, is no exception. This article seeks to provide a comprehensive examination of the various legal facets and arguments raised during the proceedings, centering on the implications of Section 148A(d) of the Income Tax Act, 1961.
Background of the Case: The crux of the matter lies in an appeal filed by Champa Impex Private Limited against an order dated 19.07.2023 in WPO No. 1294 of 2023. The appellant contested the order under Section 148A(d) of the Income Tax Act, contending that the assessing authority overlooked the fact that information for multiple assessment years cannot be requisitioned simultaneously. A pivotal point of contention was the impossibility of independently seeking information for the assessment year 2018-2019 due to pending appeals and remand orders.
Mr. Pranit Bag, representing Champa Impex Private Limited, articulated robust arguments in favor of the appellant’s position during the legal proceedings. One pivotal argument raised by the appellant was centered around the assertion that the notice issued under Section 148A(b) of the Income Tax Act on March 31, 2023, could not be modified or amended through subsequent communications. This argument sought to emphasize the sanctity and finality of the original notice, contending that any attempt to alter it through subsequent exchanges was impermissible under the law.
The appellant’s counsel also underscored the absence of an independent investigation or inquiry conducted by the assessing officer before initiating the proceedings through the issuance of the notice. This raised concerns regarding the procedural fairness of the initiation, as the appellant argued that a proper examination of the facts and circumstances should have preceded the notice under Section 148A(b). This line of argument aimed to challenge the validity of the proceedings on the grounds of procedural irregularities.
Another significant facet of the appellant’s case was the assertion that the reassessment proceedings were time-barred. This argument suggested that the assessing officer had exceeded the permissible time frame for initiating such proceedings. The appellant sought to establish that the time limitation prescribed by law for reassessment had lapsed, rendering the proceedings against them invalid.
These arguments collectively formed the crux of the appellant’s challenge against the order passed under Section 148A(d) of the Act, and they were presented with the objective of convincing the court to invalidate the reassessment proceedings initiated by the assessing officer.
Mr. Vipul Kundalia, the learned senior standing counsel representing the respondent, presented a robust defense against the appellant’s claims during the legal proceedings. One of the key pillars of the respondent’s defense was centered around the explicit mention in the notice that it pertained exclusively to the assessment year 2016-2017. The respondent sought to underscore the specificity of the information sought and the targeted nature of the proceedings, focusing on high-value cash deposits made during the demonetization period.
Highlighting the respondent’s perspective, Kundalia contended that the assessing officer had taken into account the objections and clarifications submitted by the appellant before arriving at the decision reflected in the order under Section 148A(d) of the Income Tax Act. This argument aimed to establish that the appellant was afforded ample opportunities to present their case and address any concerns they might have had regarding the proceedings.
By emphasizing the specificity of the information sought and the responsiveness of the assessing officer to the appellant’s submissions, the respondent sought to portray the reassessment proceedings as procedurally sound and well-founded. This formed a critical component of the respondent’s strategy to counter the appellant’s challenge and uphold the validity of the order under Section 148A(d) of the Act.
Court’s In-Depth Analysis and Decision:
he High Court conducted a thorough and meticulous analysis of the intricacies involved in the case of Champa Impex Private Limited vs. Union of India and Others. A pivotal aspect of the court’s examination was the scrutiny of the notice issued under Section 148A(b) of the Income Tax Act, dated 31.03.2023. The court observed that the notice explicitly mentioned the assessment year as 2016-2017, indicating a clear focus on a specific time frame.
The court delved into the grounds of suspicion that prompted the issuance of the notice. The primary concern was high-value cash deposits made during the demonetization period, spanning from March 2016 to March 2017. The total credit and debit turnover in two bank accounts during this period amounted to Rs. 87.69 crores and Rs. 85.86 crores, respectively. The court took note of specific details, such as cash deposits of Rs. 20.51 crores and RTGS debit of Rs. 61.65 crores.
Furthermore, the court acknowledged that the assessing officer had taken steps to gather information, including issuing summons under Section 131 of the Income Tax Act to the Branch Managers of relevant banks. This step aimed to obtain bank account statements and KYC details related to the specified financial year.
The court also considered the appellant’s objections, particularly emphasizing the appellant’s claim that the notice covered multiple assessment years beyond the purview of the law. However, the court discerned that, despite information pertaining to three financial years being included in the communication, the re-assessment proceedings were explicitly intended for the assessment year 2016-2017.
In its in-depth analysis, the court addressed the contention that the assessing officer, through subsequent communication, attempted to modify or amend the notice. The court rejected this argument, asserting that the information furnished to the appellant pertained solely to the assessment year 2016-2017, and the subsequent email from the assessing officer clarified the specific details sought regarding cash deposits during the financial year 2015-2016 relevant to that assessment year.
The court dismissed the appellant’s argument that subsequent communications amounted to an impermissible amendment of the original notice. It further noted that the appellant sought multiple adjournments, indicating an attempt to unduly delay the proceedings despite the assessing officer’s reasonable accommodation.
The legal interpretation provided by the court in the Champa Impex Private Limited vs. Union of India and Others case is crucial in understanding the nuanced aspects of the Income Tax Act, specifically Section 148A. The appellant had contended that the assessing officer was obligated to conduct an independent inquiry under Section 148A(a), and failure to do so rendered the notice invalid.
The court, in its meticulous analysis, clarified the nature of the assessing officer’s discretion under Section 148A(a). It underscored that the provision does not impose a mandatory duty but rather grants discretionary power to the assessing officer to conduct an inquiry if, in their opinion, it is required. The court highlighted the use of the expression “if required” in the provision, emphasizing that the decision to conduct an inquiry is contingent on the circumstances of each case.
Furthermore, the court elucidated the structured procedural framework outlined in Sections 148A(b), (c), and (d). Section 148A(b) necessitates the issuance of a notice to the assessee, providing them with an opportunity to show cause within a specified timeframe. Section 148A(c) mandates the assessing officer to consider the response furnished by the assessee in reaction to the notice. Finally, Section 148A(d) requires the assessing officer to make a decision based on the material available on record, including the assessee’s reply, and obtain prior approval from the specified authority before issuing a notice under Section 148.
The court concluded that the assessing officer diligently followed the procedural requirements laid out in Section 148A, including providing the appellant with a fair opportunity to present their objections and responding to them in a reasoned manner. This comprehensive legal interpretation forms the foundation for the court’s decision to dismiss the appellant’s challenge to the order passed under Section 148A(d) of the Income Tax Act.
Conclusion: In conclusion, the court upheld the order passed under Section 148A(d) of the Income Tax Act, dismissing the appeal. The appellant was directed to actively participate in the re-assessment proceedings without undue adjournments. This case serves as a notable precedent in interpreting the procedural requirements of income tax reassessment under Section 148A, emphasizing the importance of specificity in notice issuance and the need for active cooperation in the assessment process. The court’s detailed analysis provides valuable insights into the intricate legal aspects surrounding income tax proceedings, contributing to the jurisprudence of taxation law in India.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
1. This intra court appeal by the writ petitioner is directed against the order dated 19.07.2023 in WPO No. 1294 of 2023. The said writ petition was filed by the appellant challenging an order passed under Section 148A(d) of the Income Tax Act, 1961 (the Act for brevity).
2. As could be seen from the grounds canvassed in the writ petition as well as from the submissions made by Mr. Pranit Bag, learned advocate appearing for the appellant writ petitioner, the case of the appellant is that the respondent assessing authority had failed to consider that information for several assessment years cannot be called for as has been done in the notice issued under Section 148A(b) of the Act dated 31.03.2023. It is further submitted that no information could be sought for separately for the assessment year 2018-2019 since the appeal is pending before the appellate authority and the re-assessment proceedings in relation to the said year has been challenged by the appellant before this court and by order dated 15.03.2022,the matter stood remanded back to the assessing officer.
3. It is further submitted that the notice dated 31.03.2023 issued under Section 148A(b) of the Act cannot be modified or amended by a subsequent communication and the only option available was to drop the proceedings and issue fresh notice if the same is permissible under law. Further it is contended that the respondent assessing officer did not conduct any independent investigation or enquiry under Section 148A(a) of the Act before initiating proceedings by issuance of a notice under Section 148A(b) of the Act. Further it is contended that the re-assessment proceeding is time barred and cannot be carried on against the appellant.
4. Mr. Vipul Kundalia, learned senior standing counsel appearing for the respondent on the other hand would contend that the notice issued under Section 148A(b) of the Act was pertaining to the assessment year 2016-2017 as is evident from the notice and the assessing officer has not called for information for multiple assessment years as alleged by the appellant. It is further submitted that after the receipt of the notice, the assessee had sent their objection/interim reply dated 20.04.2023 for which an appropriate reply was given by the assessing officer by email dated 20.04.2023 clearly mentioning that the information sought for was in respect of cash deposits during the financial year 2015-2016 pertaining to the assessment year 2016-2017. Inspite of such clarification, the assessee submitted further objection on 29.04.2023 which was considered by the assessing officer and an order under Section 148A(d) of the Act was passed on 07.05.2023 which was impugned in the writ petition. The learned Single Bench after noting the facts clearly held that notice for commencement of re-assessment was not issued for multiple years and the case as projected by the appellant is baseless and frivolous and rightly dismissed the writ petition. It is further submitted that the appellant will have adequate opportunity in the re-assessment proceedings in which it will be well open to the appellant to place all documents in support of their contention and face the re-assessment proceedings. With the above submissions, the learned counsel prayed for dismissal of this appeal.
5. We have heard Mr. Pranit Bag, learned advocate appearing for the appellant and Mr. Vipul Kundalia, learned senior standing counsel appearing for the respondent.
6. The assessing officer issued notice under Section 148A(b) of the Act dated 31.03.2023. The notice mentions the assessment year as 2016-2017.The main ground of suspicion based on which such notice was issued pertain to high value cash deposit during the demonetization period from March 2016 to March 2017 in two bank accounts where the total credit and debit turnover was Rs. 87.69 crores and Rs. 85.86 crores out of which cash deposit of Rs. 20.51 crores and RTGS debit was Rs. 61.65 crores. The annexure to the said notice further states that summons under Section 131 of the Act was issued to the Branch Mangers of the concerned banks for furnishing the bank account statements of the relevant bank accounts for the relevant financial year and KYC details. Summons under Section 131 of the Act was also issued to the assessee on 04.02.2023 with a request to furnish certain documents and information in order to examine the nature of transaction which in the opinion of the assessing officer was suspicious. It is further stated that in response to the said summons, the assessee had neither appeared nor had made any submission. It is further stated that the assessee which was a company incorporated during 2007 had an authorized share capital of Rs. 5,000,000/- and its paid-up capital was Rs. 11,22,000/-. The bank account statements in two bank accounts maintained with Standard Chartered Bank Limited, Kolkata were perused and the transactions were analyzed and on such analysis, it was found that the assessee has made huge cash deposits in different financial years. The details of such deposits for the financial years 2016-2017, 2017-2018 and 2018-2019 were furnished in a tabulated form. Further it has been stated that as per the return of income filed by the assessee it is seen that the assessee had shown meager and/or negative profit before tax in comparison to turnover in its income tax return. Therefore, the assessing officer opined that the financials shown in the return of income are not commensurate with the cash deposits made in the said bank accounts. Further it is stated that the assessee is the real beneficiary and the deposits made in the bank accounts of the assessee by way of cash remained unexplained and therefore an inference was drawn that the assessee had not shown the true picture of their business affairs and suppressed/concealed the income/receipts. The assessee was required to provide all information as available on record namely the list of all bank accounts maintained during the assessment year 2016-2017; bank statement of all bank accounts maintained during the assessment year 2016-2017.The cashbook and bankbook from 01.04.2015 to 31.03.2016, the assessee was called upon to provide documentary evidence establishing identity, credit worthiness, and genuineness of the entities advancing loan and also provide the source of funds of the entities who had advanced loan to the assessee. The assessee was further directed to provide details of their fixed assets for the relevant financial year, names and details of promoters/directors of the assessee for the said period and in which other companies they were holding same position during the said period.
7. In the light of the above information furnished, the assessee was requested to show cause as to why adverse inference should not be drawn in their case and also to explain why a notice under Section 148 of the Act should not be issued taking into consideration the facts. The assessee submitted a reply dated 20.04.2023 stating that the same is in the nature of a preliminary objection to the maintainability of the re-assessment proceedings and the jurisdiction of the assessing officer to issue the notice under Section 148A(b) of the Act.
8. The first objection raised by the assessee was that the re-assessment proceedings has been sought to be initiated pursuant to information received against the assessee without any verification thereof and that it pertained to three financial years and information relating thereto have been clubbed in the notice which has been issued being financial years 2016-2017, 2017-2018 and 2018-2019. It was further stated that an appeal against the assessment order dated 27.04.2021 for the financial year 2017-2018 has been preferred and the appeal is pending before the appellate authority. Further the re-assessment proceedings in relating to the said year has been challenged before this court and by order dated 15.03.2022, the Division Bench remanded the matter back to the assessing officer and the same issue is sought to be agitated through the notice issued under Section 148A(b) of the Act. Further it was submitted that a bare perusal of the notice makes it evident that though the notice calls for documents relating to various assessment years which is beyond the purview of law and admittedly notice for the assessment year 2016-2017 has been issued but documents in relation to the assessment years 2017-2018, 2018-2019 and 2019-2020 have been called for. The assessee sought a clarification as to what are the documents which the assessing officer seeks in relation to the assessment year 2016-2017 since clubbing of various assessment years is not permissible under law. On receipt of such reply, the assessing officer by email dated 20.04.2023 addressed to the assessee informed its Director that they are required to submit the details of cash deposits made in a particular bank account in the name of the assessee during the financial year 2015-2016 relevant to the assessment year 2016-2017 and such reply should reach the assessing officer within 22nd April, 2023. The assessee by email dated 21.04.2023 sought for seven days time to provide a befitting reply to their email. The assessing officer by email dated 23.04.2023 informed the assessee that they are aware that the case is likely to be time barred and hence seven days cannot be given as they have been provided substantial time while issuing notice under Section 148A(b) however, the assessee chose to wait till the last date and considering the request three days time was given and the assessee was required to submit their reply by 25.04.2023. Once again by email dated 24.04.2023, the assessee sought for minimum ten days time. This request was considered and the assessing officer by email dated 25.04.2023 granted time till 30.04.2023. By email dated 29.04.2023, the assessee enclosed certain documents and also submitted a reply stating that the assessee has filed its return for the assessment year 2016-2017 on 13.10.2016 where they declared that the tax payable was Rs. 13,93,520/- and the return was acknowledged by the department.
9. Further it was stated that on perusal of the reasons for issuing the notice under Section 148A(b) of the Act, it is seen that it has been issued upon receipt of information from unknown sources and various allegations have been made against the assessee without conducting any independent enquiry to support the initiation of the re-assessment proceedings. The assessee reiterated its earlier objection that the notice cannot be issued clubbing the three assessment years and therefore it is without jurisdiction. Further it was stated that by the reply given by the assessing officer by email dated 20.04.2023 the notice issued under Section 148A(b) of the Act cannot be modified and the same is not permissible under law. With the above submissions, the assessee prayed for dropping the proceedings.
10. The assessing officer proceeded to consider the objection raised by the assessee including the written submissions made on 29.04.2023 and noted the key points raised by the assessee therein. The assessing officer concluded that the assessee failed to produce any credible evidence to explain the source of cash deposits which had been pointed out in the notice issued and failed to substantiate the same with relevant entries in its books of accounts. The other contentions which were raised by the assessee were rejected and it was held that it is a fit case where notice under Section 148 of the Act has to be issued for the assessment year 2016-2017.
11. As could be seen from the notice issued under Section 148A(b) of the Act, the same pertains only to the assessment year 2016-2017 as has been mentioned in the tabulated form in page 1 of the notice. On carefully going through the information which was furnished to the assessee in the form of an annexure to the said notice, it is seen that the assessing officer sought to initiate re-assessment proceedings only for the assessment year 2016-2017. It is no doubt true that the information which was received by the department pertaining to the three financial years have been set out but nonetheless, the re-assessment proceedings which have been proposed to be initiated pertained only to the assessment year 2016-2017. The assessee raised an objection in their reply dated 20.04.2023 stating that notice cannot be issued by clubbing three assessment years. On receipt of the reply, the assessing officer in no uncertain terms has clarified by email dated 20.04.2023 that they were required to submit the details of cash deposits made in a particular bank account in the name of the assessee during the financial year 2015-2016 relevant to the assessment year 2016-2017. The assessee would contend that the assessing officer sought to amend the notice dated 31.03.2023 by issuance of the email which is impermissible under law. The said contention raised by the assessee is devoid of any merits as the information which was furnished to the assessee though contained information pertaining to the three assessment years, the information called for in the notice dated 31.03.2023 pertained only to the assessment year 2016-2017. Thus, the email sent by the assessing officer dated 20.04.2023 cannot be construed to be an amendment of the notice dated 31.03.2023. Accordingly, such contention raised by the assessee is rejected.
12. In the preceding paragraphs, it has been noted that the assessee had repeatedly sought for adjournments which would show that the assessee attempted to drag the matter fully knowing well that the assessment will be time barred. The assessing officer was in fact reasonable and accommodated their requests for adjournment on two occasions and granted time till 30.04.2023. It is only after receiving the said information, the assessee sought to give a reply on merits on 29.04.2023 once again reiterating what had been stated earlier. The contentions raised by the assessee have been considered by the assessing officer and a reasoned order has been passed recording all facts and dealing with all the objections raised by the assessee.
13. Mr. Bag contended that notice under Section 148A(b) of the Act could not have been issued without conducting an independent enquiry in terms of Clause (a) of Section 148 of the Act. Section 148A of the Act was inserted by Finance Act, 2021 with effect from 01.04.2023 deals with conducting inquiry providing opportunity before issue of notice under Section 148. It states that the assessing officer shall, before issuing any notice under Section 148A(a) conduct an inquiry, if required, with the prior approval of specified authority with respect to the information which suggests that income chargeable to tax as escaped assessment. Thus, the conduct of enquiry has not been made mandatory but discretion and has been vested with the assessing officer as the provision uses its expression “if required”. In the event the assessing officer proposes to conduct an enquiry, or in other words if in the opinion of the assessing officer, an enquiry is required to be conducted, such enquiry can be conducted with the prior approval of the specified authority with respect to the information which suggests that the income chargeable to tax has escaped assessment. The assessing officer while dealing with this objection raised by the assessee has stated that the information was specific and therefore no enquiry under Section 148A(a) of the Act was deemed to be required. This finding rendered by the assessing officer cannot be stated to be erroneous for the court to interfere. Thus, the procedure under Clause (a) of Section 148A is not applicable to the case on hand. If such is the conclusion that is to be arrived at, then the assessing officer before issuing any notice under Section 148 of the Act, in terms of the Clause (b) has to 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 which shall not be less than seven days but not exceeding thirty days, as to why a notice under Section 148 should not be issued on the basis of information which suggests that the income chargeable to tax has escaped assessment in their case for the relevant assessment year. The procedure required to be followed under Clause (b) of Section 148A has been followed by the assessing officer in the instant case. In terms of Clause (c) of Section 148A, the assessing officer has to consider the reply of the assessee in response to the notice issued under Clause (b). We find from the order dated 07.05.2023 passed under Section 148A(d) of the Act that the assessing officer has considered reply/replies furnished by the assessee in response to the notice issued under Clause (b).In terms of Clause (d), the assessing officer has to 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 the time framed. The stipulation under Clause (d) has been complied with by the assessing officer who has taken a decision, on the basis of the material available on record including the reply/replies given by the assessee and found that the case of the assessee for the assessment year under question namely 2016-2017 is a fit case to issue notice under Section 148 of the Act and prior approval of the specified authority has also been obtained. Thus, the provision of the Section 148A of the Act has been scrupulously followed by the assessing officer and there is no error in the decision-making process of this court to interfere.
14. Thus, for the above reasons, we find that the challenge to the order passed under Section 148A(d) of the Act has to necessarily fail.
15. In the result, the appeal is dismissed. However, there will be no order as to costs.
16. The appellant assessee is directed to participate in the re-assessment proceedings which shall be conducted by the assessing officer expeditiously without granting any adjournment to the assessee and endeavor to complete the same as expeditiously as possible. The assessee is directed to cooperate in the matter.