Delhi High Court Quashes Section 148A(d) Order Due to Misplaced Allegation in Notice.

Court Name : Delhi High Court

Parties : Krishna Diagnostic Private Limited Vs ITO

Decision Date : 25 May 2023

Judgement ref : W.P.(C) 7266/2023

IN THE HIGH COURT OF DELHI AT NEW DELHI

% Date of Decision: 25.05.2023

+ W.P.(C) 7266/2023

KRISHNA DIAGNOSTIC PRIVATE LIMITED

..... Petitioner

Through: Mr Gaurav Jain, Adv.

versus

INCOME TAX OFFICER WARD 14 3 DELHI

..... Respondent

Through: Mr Abhishek Maratha, Sr Standing

Counsel with Mr Akshat Singh,

Standing Counsel.

CORAM:

HON'BLE MR. JUSTICE RAJIV SHAKDHER

HON'BLE MR. JUSTICE GIRISH KATHPALIA

[Physical Hearing/Hybrid Hearing (as per request)]

RAJIV SHAKDHER, J. (ORAL):

CM Appl.28271/2023

1. Allowed, subject to the petitioner filing legible copies of the

annexures, at least three days before the next date of hearing.

W.P.(C)7266/2023& CM Appl.28270/2023[Application filed on behalf of

the petitioner seeking interim relief]

2. Issue notice.

2.1 Mr Abhishek Maratha, learned senior standing counsel, accepts notice

on behalf of the respondent/revenue.

3. Given the directions that we propose to issue, Mr Maratha says that

no counter-affidavit is required to be filed, and he will rely on the record

presently available with the Court. Therefore, with the consent of the

counsel for the parties, the matter is taken up for final hearing and disposal, at this stage itself.

4. This writ petition concerns Assessment Year (AY) 2017-18. The

allegation levelled against the petitioner via notice dated 19.05.2022 issued under Section 148A(b) of the Income Tax Act, 1961 [in short, “Act”] is, that it had sold an immovable property worth Rs.8 crores, and that capital gains earned had not been disclosed.

4.1 The record shows, that the petitioner filed a response to the

aforementioned notice, which is dated 03.06.2022.

4.2 Inter alia, the petitioner pointed out, that it had not sold any property, and instead bought the property. The details of the transaction are also provided in the said response.

5. Pertinently, the petitioner had indicated in the reply, that the purchase

consideration of subject property was Rs.8 crores, and that tax at source had been deducted at the rate of 1%, which was deposited via the prescribed

form i.e., Form 26QB.

5.1 In support of this assertion made in the reply, the copy of Form 26AS

was annexed.

6. It is important to note, that prior to the issuance of notice under

Section 148A(b) of the Act, the petitioner had also been served a notice

under Section 133(6) of the Act. This notice is dated 25.03.2021. The

petitioner, it appears, responded to the said notice, and furnished information that had been sought.

7. The Assessing Officer (AO), having realized that the allegation made

was grossly erroneous i.e., that the petitioner had not sold the subject

property and had instead purchased the same, turned the allegation on its

head.

8. A perusal of the impugned order dated 28.07.2022 passed under

Section 148A(d) of the Act shows, that the AO concludes, that income on

transaction worth Rs.8,48,00,000/- had escaped assessment.The rationale

provided for the same is contained in paragraph 7 of the said order. For the

sake of convenience, the same is extracted hereafter:

“7. Reply of the assessee has been considered. Due to certain

mistake in the information provided, earlier it was believed

that the assessee had sold the immovable property. However,

it is now clear that the assessee had indeed purchased the

immovable property. The following points are notable in

context of the information available on record:

(i) Assessee has though claimed that it had filed reply to the

notice u/s 133(6) dated 25.03.2021. Though there is nothing

on record to prove that the assessee had filed any reply.

(ii) From the verification made on e-filing portal, it is noted

that no form 26 QB has been filed by the assessee showing this

particular transaction in AY 2017-18. Therefore, it cannot be

ascertained that TDS has been deducted on the said

transaction. Also, the assessee has not provided the copy of

Form 26QB.

(iii) There is no declaration of this asset (acquired for a total

of Rs.8,48,00,000, including stamp duty) in the return of

income as is evident from close perusal of the respective

columns of Balance Sheetsection of the ITR form or the copy

of balance sheet uploaded with the Form 3CA/3CD (audit

report). Also the Auditor has not reported the said purchase

in respective column 34(a) of the Form No.3CD for the year

under consideration. It means the acquisition was not

disclosed to the auditor either. The payments appearing on

page 6 of the registered sale deed indicates that the assessee

has made payments via cheques drawn upon HDFC Bank,

Fort, Mumbai; HDFC Bank, K.G. Marg, HDFC Bank, Manik

Motwani Marg, Mumbai whereas the declared bank accounts

include only HDFC Bank, Vivek Vihar. Therefore, the

payments for acquisition of this property are made out of

unexplained sources.”

9. Mr Gaurav Jain, who appears on behalf of the petitioner, says that the

rationale provided by the AO is flawed for the following reasons:

(i) The purchase of the subject property was disclosed by the

petitioner in its balance sheet.

(ii) The details of bank account were also provided.

(iii) Apart from sourcing the consideration from its own funds, loan

had also been taken to supplement the purchase consideration.

10. Insofar as the balance sheet is concerned, our attention has been

drawn to page 75 of the case file. The details of the bank account are

provided on page 87 of the case file.

10.1 Likewise, in support of his plea, that loan had been availed to the

extent of Rs.6.75 cores, our attention has been drawn to the certificate issued by HDFC Bank. Reliance in this regard is placed on document marked as

Annexure P-9, appended on page 137 of the case file.

11. In our view, these are facts which are material,and could not have

been given a short shrift, as has been done by the AO. Mr Jain is right in

contending that there was no application of mind by the AO while passing

the impugned order dated 28.07.2022 under Section 148A(d) of the Act. Mr

Jain is also rightin contending that the aforementioned order is not aligned

with the notice dated 19.05.2022 issued under Section 148A(b) of the Act.

12. We are also surprised, that the notice under Section 148A(b) was

issued on 19.05.2022 wherein, as observed above, the allegation made is that

the petitioner had sold the subject property, despite information in that

regard being supplied by the petitioner, as far back as on 22.04.2021, against a notice issued under Section 133(6) of the Act.

13. The petitioner had clearly indicated, that it had purchased the

property. The assertation was backed by relevant documents, which for

some reason, the AO chose to ignore.

14. We may note, that in support of this plea, Mr Jain has relied on

Annexure P-7 appended on page 131 of the case file.

15. Mr Abhishek Maratha, learned senior standing counsel, who appears

on behalf of the respondent/revenue, says that the best way forward would

be for the AO to revisit the conclusion arrived at in the impugned order, in

the light of what has been noted hereinabove.

16. Having regard to the aspects noted hereinabove, we are of the view,

that if at all, the AO deems it fit to carry out a fresh exercise,it would be from the stage prior to the issuance of notice under Section 148A(b) of the Act. Clearly, the AO has missed the most crucial part of the transaction, that it was a purchase and not a sale transaction.

17. Accordingly, the impugned order dated 28.07.2022 passed under

Section 148A(d) of the Act, and the consequential notice of even date i.e.,

28.07.2022 are set aside.

18. Although the petitioner has not made a specific prayer with regard to

the notice dated 19.05.2022 issued under Section 148A(b) of the Act, we are

of the view, as noted above, that the AO will have to go back, in a manner of speech, to the starting block, and commence from the stage, if at all he

chooses to reassess the petitioner, prior to the issuance of the notice under Section 148A(b) of the Act.

19. The writ petition is disposed ofin the aforesaid terms.

20. Consequently, pending application shall stand closed.

21. Parties will act based on the digitally signed copy of the order.

RAJIV SHAKDHER, J

GIRISH KATHPALIA, J

MAY 25, 2023