Case Law Details
Pramod Kumar Vs ACIT (Telangana High Court)
HC is of the view that present is not a fit case to interdict the proceedings at the very threshold. Reasons have been assigned by the assessing officer as to why the explanation given by the petitioner could not be accepted. Certainly, such reasons given have a nexus with the formation of the belief that income chargeable to tax has escaped assessment. It is equally trite that sufficiency or adequacy of reasons cannot be gone into in a proceeding under Article 226 of the Constitution of India. That apart, we are at a stage prior to issuance of notice under Section 148 of the Act.
At this stage, a detailed analysis is neither warranted nor justified. As rightly pointed out by the Supreme Court in Anshul Jain Vs. Principal Commissioner of Income Tax (supra), petitioner would have ample opportunities to agitate his contentions during the reassessment proceedings.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Heard Mr. Krishna Koundinya, learned Senior Counsel representing Mr. A.V.A. Siva Kartikeya, learned counsel for the petitioner and Mr. J.V.Prasad, learned Standing counsel, Income Tax Department for the respondents.
2. This writ petition has been filed under Article 226 of the Constitution of India assailing the legality and validity of the order dated 29.07.2022 passed by respondent No.1 under Section 148A(d) of the Income Tax Act, 1961 (briefly ‘the Act’ hereinafter) for the assessment year 2015-16 as well as the consequential notice of even date issued under Section 148 of the said Act.
3. Petitioner is an assessee under the Act having the status of ‘individual’. For the assessment year 2015-16, petitioner filed return of income on 27.11.2015 declaring total income of Rs.45,99,150.00.
4. Assessment case of the petitioner was selected for scrutiny whereafter, respondent No.1 passed the assessment order dated 30.11.2017 under Section 143(3) of the Act holding that an amount of Rs.14,81,585.00 was required to be paid as tax along with interest.
5. Thereafter, respondent No.1 issued notice under Section 148 of the Act on 05.04.2021 contending that he had reasons to believe that income chargeable to tax for the aforesaid assessment year had escaped assessment. In response thereto, petitioner filed his returns. Respondent No.1 proceeded with re-assessment by issuing notice under Section 142(1) of the Act. In the meanwhile, Supreme Court passed order in Union of India v. Ashish Agarwal1 whereafter, a fresh notice dated 25.05.2022 was issued by respondent No.1 to the petitioner under Section 148A(b) of the Act. Petitioner was furnished the following information and materials:
In this case assessment u/s. 143(3) was completed on 30.11.2017, determining total income of Rs.48,44,480/- as against the returned income of Rs.45,99,150/-.
Subsequently, the information was received that the assessee has earned profit of Rs.3,73,26,923/- on trading of equity/derivatives through M/s. Kayan Securities Pvt. Ltd. However, the assessee has not disclosed the profits of Rs.3,73,26,923/-, either in the return of income or during the course of assessment proceedings. Hence, there is a failure on the part of the assessee to disclose the information as necessary for the purposes of assessment of his income and there is a reason to believe that the income of Rs.3,73,26,923/-chargeable to tax has escaped assessment, within the meaning of section 147 of the I.T. Act.
6. In response thereto, petitioner filed reply on 04.06.2022 stating that for the financial year 2014-15, he had earned profits from trading in commodities amounting to Rs.3,96,57,630.00 from M/s. Kayan Securities Private Limited, which was disclosed on the credit side of the profit and loss statement of his proprietary firm-M/s Agarwal Foundries.
7. Notwithstanding the same, impugned order was passed by respondent No.1 holding as follows:
The submissions of the assessee have been considered. In the instant case, it was found that M/s Kayan Securities Pvt. Ltd. was actively involved in trading of illiquid options with the sole motivation of generating profits and lossess to evade taxes for its clients. The same was also confirmed by the Director of M/s Kayan Securities Pvt. Ltd. Hence, it is established that whatever gains/losses generated from trading with M/s Kayan Securities Pvt. Ltd. is purely non-genuine in nature with the only purpose being tax evasion.
The assessee has submitted that the profits received from M/s Kayan amounting to Rs.3,96,57,630/- was shown under Sale of services in the P&L account. However, in the P&L account, the assessee has shown an amount of Rs.73,58,33,802/- under Sales Account. Thus, the breakup of the sales account has not been provided by the assessee. Without prejudice to the above, even if it is considered that assessee has offered the same amount in the sale of services, given the background of M/s Kayan Securities, the entire profit received from it should be treated as income and not as gross receipts, as claimed by the assessee.
Hence, in the light of the above facts, it is apparent that the income of Rs.3,73,26,923/-, received as profit on trading of equity/derivatives through Kayan Securities Pvt. Ltd. has escaped assessment within the meaning of section 147 of the I.T. Act. Therefore, it is a fit case for issue of notice u/s. 148 of the I.T. Act., 1961.
This order is passed with the prior approval of the Pr.CCIT, AP & Telangana, Hyderabad vide letter in F.No.Pr.CCIT/Tech/53/Approval u/s 148A/2022-23 dated 27.07.2022.
8. This was followed by the impugned notice dated 29.07.2022 issued by respondent No.1 under Section 148 of the Act.
9. Learned Senior Counsel for the petitioner submits that the profits received from M/s. Kayan Securities Private Limited were shown in the profit and loss statement of the said firm, which was a proprietary firm of the petitioner. Therefore, the assessing officer was not justified in brushing aside the clarification provided by the petitioner and proceeding to issue notice under Section 148 of the Act.
10. On the other hand, learned Standing Counsel for the respondents submits that at the stage of passing an order under Section 148A(d) of the Act, only a prima facie satisfaction is required to be arrived at by the assessing officer as to whether issuance of notice under Section 148 of the Act is called for or not. At this stage, no detailed order or detailed proceedings are required.
According to him, in the reassessment proceedings, petitioner will have all the opportunities to substantiate his claim. He has placed reliance on a recent decision of the Supreme Court dated 02.09.2022 in SLP(c) No.14823 of 2022 (Anshul Jain Vs. Principal Commissioner of Income Tax) and submits that Supreme Court did not interfere with the order of the Punjab and Haryana High Court rejecting challenge to the order passed under Section 148A(d) of the Act.
11. Submissions made by learned counsel for the parties have received the due consideration of the Court.
12. After hearing learned counsel for the parties and considering the materials on record, we are of the view that present is not a fit case to interdict the proceedings at the very threshold. Reasons have been assigned by the assessing officer as to why the explanation given by the petitioner could not be accepted. Certainly, such reasons given have a nexus with the formation of the belief that income chargeable to tax has escaped assessment. It is equally trite that sufficiency or adequacy of reasons cannot be gone into in a proceeding under Article 226 of the Constitution of India. That apart, we are at a stage prior to issuance of notice under Section 148 of the Act.
13. At this stage, a detailed analysis is neither warranted nor justified. As rightly pointed out by the Supreme Court in Anshul Jain Vs. Principal Commissioner of Income Tax (supra), petitioner would have ample opportunities to agitate his contentions during the reassessment proceedings. We see no ground to entertain the writ petition.
14. Writ Petition is accordingly dismissed. No costs.
As a sequel, miscellaneous petitions, pending if any, stand dismissed.
