Indure Pvt. Ltd. Vs PCIT (Delhi High Court)
Summary: The Delhi High Court, in Indure (P.) Ltd. Vs Principal Commissioner of Income Tax, examined a challenge to an order dated 29 June 2022 passed under Section 148A(d) of the Income Tax Act, 1961, and a reassessment notice dated 30 June 2022 issued under Section 148 for Assessment Year 2013-14. The petitioner contended that the Income Tax Department had not provided adequate time to respond to the show-cause notice dated 20 May 2022. It sought reopening of the income-tax portal for three working days to submit its objections and requested that further proceedings pursuant to the impugned order and notice be restrained.
The petitioner argued that the documents originally supplied with the show-cause notice were illegible and unreadable. It had requested legible copies through a preliminary reply dated 25 May 2022, following which the department supplied another set of documents on 18 June 2022. According to the petitioner, it reasonably expected two weeks from that date to respond, relying on the Supreme Court’s decision in Union of India & Ors. Vs Ashish Agarwal. However, the Assessing Officer passed the order under Section 148A(d) on 29 June 2022. The Revenue disputed these submissions, maintaining that readable documents had already been supplied and that the subsequent communication was issued as an additional precaution.
The Revenue also questioned the authenticity of the petitioner’s supporting bills, pointing to missing supplier particulars and incomplete transportation documents. More significantly, the department relied on the statement of an alleged supplier, Baburam Samasi, associated with R B Fabrication. Although he acknowledged that certain ICICI Bank accounts stood in his name, he denied conducting the transactions reflected in one of those accounts. He stated that another individual had obtained his signed cheque leaves and ATM card after promising to help him secure business orders. The High Court considered this testimony relevant to determining whether sufficient preliminary material existed to initiate reassessment proceedings.
On the question of natural justice, the High Court referred to Chairman, Board of Mining Examination and Chief Inspector of Mines Vs Ramjee and M/s Tikara Vs State of M.P. & Ors., observing that procedural fairness must be assessed in the circumstances of each case rather than through inflexible rules. The Court noted the parties’ conflicting positions concerning the legibility of the documents supplied. It declined to adjudicate that factual dispute in writ proceedings. Having considered the supplier’s statement and the material placed before it, the Court concluded that a prima facie case of escapement of income existed and that issuance of the notice under Section 148 was warranted.
Accordingly, the Delhi High Court dismissed W.P.(C) No. 10307 of 2022 along with the pending application. It nevertheless clarified that the Assessing Officer must decide the reassessment proceedings independently on their merits, without being influenced by observations contained in the High Court’s order. The decision concerned the validity of initiating reassessment proceedings and did not finally determine whether the transactions were bogus or whether the disputed income was taxable. The related exemption applications, C.M. Nos. 29717/2022 and 29719/2022, were separately disposed of.
Related Reading: The Supreme Court subsequently declined to interfere with the Delhi High Court’s decision in Indure Private Limited Vs PCIT – Supreme Court Dismisses SLP Against Reassessment Proceedings, leaving the reassessment proceedings to continue on their merits.
Cases Discussed
- Union of India & Ors. Vs Ashish Agarwal — 2022 SCC OnLine SC 543. Cited by the petitioner concerning the opportunity to respond to reassessment notices.
- Chairman, Board of Mining Examination and Chief Inspector of Mines Vs Ramjee — (1997) 2 SCC 256, as cited in the supplied judgment. Referred to regarding the flexible application of principles of natural justice.
- M/s Tikara Vs State of M.P. & Ors. — AIR 1997 SC 1691, as cited in the supplied judgment. Referred to regarding the application of natural justice according to the circumstances of each case.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
C.M.Nos.29717/2022 & 29719/2022
Exemption allowed, subject to all just exceptions.
Accordingly, the applications stand disposed of.
W.P.(C) No.10307/2022 & C.M.No.29718/2022
1. Present writ petition has been filed challenging the order dated 29th June, 2022 passed by the Respondent No. 2 under Section 148A(d) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’) and notice dated 30th June, 2022 issued by the Respondent No.2 under Section 148 of the Act for the Assessment Year 2013-14. Petitioner also seeks a direction to the Respondent No. 2 to reopen the income tax portal of the Petitioner Company and allow it three working days to file a reply to the show cause notice dated 20th May, 2022 and to restrain the Respondents from continuing any proceedings in pursuance to impugned order dated 29th June, 2022 and impugned notice dated 30th June, 2022 during the pendency of the present writ petition.
2. Learned counsel for the Petitioner states that the impugned order has been passed by Respondent No.2 under Section 148A(d) of the Act without giving the Petitioner a reasonable time of two weeks to file its objection, as directed by the Supreme Court in Union of India & Ors. vs. Ashish Aggarwal 2022 SCC Online SC 543 and as requested by the Petitioner vide its letter dated 25th May, 2022.
3. Learned counsel for the Petitioner states that the documents annexed to the notice dated 20th May, 2022, which were relied upon by Respondent No.2 for alleging ‘escapement of income’ by the Petitioner Company, were completely illegible and unreadable. He states that the Petitioner filed a preliminary reply dated 25th May, 2022 requesting for legible copies of the documents. He states that Respondent No.2, after almost a month, vide its email dated 18th June, 2022 provided legible/readable copies of all the said relied upon documents along with various additional documents.
4. Learned counsel for the Petitioner states that the Petitioner Company was under a bona fide belief that, in compliance with the order of the Supreme Court as well as its request letter dated 25th May, 2022, it would be granted two weeks time from the date of providing the documents i.e. till 02nd July, 2022 for responding to the notice and thereafter would be provided an opportunity of being heard. However, he states that the Petitioner Company received an email from the Respondent No.2 intimating that the impugned order has already been passed on 29th June, 2022 under Section 148A(d) of the Act.
5. Per contra, Puneet Rai, learned standing counsel for the Respondents-Revenue, who appears on advance notice, states that at the initial stage itself; legible copies of the documents were provided to the Petitioner by the Assessing Officer. He states that out of abundant precaution, another set of clear and legible copies of the documents were provided to the Petitioner on 18th June, 2022.
6. Rai further states that the documents annexed by the Petitioner in the present writ petition at Annexure P-10 clearly shows that the bills relied upon by the Petitioner are fabricated inasmuch as they do not even mention the address and mobile number of the supplier. He states that even in the transportation bills, the consignor address has not been mentioned.
7. It is settled law that ‘principle of natural justice is no unruly horse and no lurking land mine’ as held by Mr.Justice Krishna Iyer in Chairman, Board of Mining Examination and Chief Inspector of Mines Vs. Ramjee, (1997) 2 SCC 256. In fact, in M/s Tikara Vs. State of M.P. & Ors, AIR 1997 SC 1691, it has been held that the principles of natural justice cannot be petrified or fitted into rigid moulds. They are flexible and turn on the facts and circumstances of each case. Consequently, the questions that arise are whether there has been any unfair deal by the respondent?
8. In the present instance, one of the alleged supplier of the petitioner, Mr. Baburam Samasi, has made a statement that he had not carried out the transactions with the petitioner which are appearing in his bank account with ICICI Bank Ltd. The relevant portion of the statement made by the supplier — Mr.Baburam Samsi is reproduced hereinbelow:-
Q.8 As per information available with us, you have four bank accounts with account numbers 019505500296; 019505003683; 019505005796; 019505005822 in the name of R B Fabrication maintained with ICICI Bank Ltd, Bisra Road, Rourkela. Please confirm.
Ans: Yes, I confirm.
Q.9 Kindly peruse the account statement of account number 019505500296 in the name of R B Fabrication being shown to you and confirm that the transactions appearing therein were carried out by you.
Ans: No, I have not carried out the transactions which are appearing in the bank account statement mentioned above i.e. 019505500296 with ICICI Bank Ltd.
Q.10 Please refer to your answer to Q. No. 8 wherein you have stated that the accounts mentioned therein belong to you. However, in answer to Q. No. 9 you are denying the facts that you have carried out transactions in account number 019505500296. Please explain the discrepancy.
Ans: I was approached by one Sri Prabhu Agarwal, resident of Udit Nagar, Near Malgodam Road, Rourkela who asked me to open bank accounts with the assurance that he will help me in getting orders for my proprietary concern R B Fabrication. Accordingly, I went with Sri Prabhu Agarwal and opened bank accounts in ICICI Bank Ltd, Bisra Road Branch, Rourkela. The ATM Card and Cheque book issued by the bank to me was taken from me by Sri Prabhu Agarwal as he told that he required the same for helping me in getting orders. All the cheque leaves were signed by me without entering any amount or date and were handed over to Sri Agarwal. He did not help me in getting any orders. When I asked him to hand over the cheque leaves and the ATM Card, he gave me two signed cheques of SBI without mentioning any amount therein and told to present the cheques after few months. He also gave me the corresponding passbook. I went to SBI a few times and ascertained the balance in the said account but every time I found that there was insufficient balance in the account and was unable to present the cheque. After a few days, Sri Agarwal became untraceable and till date his whereabouts are not known to me. I suspect that all the above transactions in the account mentioned by you in q. No 8 and 9 were carried out by him.
(Emphasis supplied)
9. In view of the testimony of the supplier, this Court is of the opinion that the matter has to proceed further. Further, even if the documents now sought to be relied upon by the petitioner are taken into account, this Court is of the view that the notice under Section 148 of the Act was called for —as a prima facie case of escapement of income was made out. Moreover, as it is the case of the Respondents that, in the first instance, clear and legible copies were supplied to the Petitioner, this Court is of the opinion that the said dispute cannot be adjudicated in the writ proceedings.
10. Accordingly, the present writ petition along with pending application is dismissed. However, this Court clarifies that the Assessing Officer shall decide the matter on its own merits without being influenced by any observation made in the present order.
