Calcutta High Court
Castle Suppliers Pvt. Ltd. & Anr vs Union Of India & Ors on 12 June, 2025
OD-28
WPO/1132/2024
ORDER SHEET
THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
ORIGINAL SIDE
Castle Suppliers Pvt. Ltd. & Anr.
Versus
Union of India & Ors.
BEFORE:
The Hon'ble JUSTICE RAJA BASU CHOWDHURY
Date: 12th June 2025
Appearance:
Mr. Satrajit Sen, Advocate
Mr. Hemant Tiwari, Adocate
for the petitioners
Mr. Soumen Bhattacharjee, Adv.
Mr. Ankan Das, Advocate
Ms. Shradhya Ghosh, Advocate
for the respondents
1. Challenging inter alia the order passed under section 148A(d) of the
Income Tax Act, 1961 (hereinafter referred to as "the said Act") for the
assessment year 2017-18 the instant writ petition has been filed. It is the
petitioners' case that the Assessing Officer had not appropriately considered
the response filed by the petitioners.
2. Mr. Sen, learned advocate appearing in support of the writ petition
by drawing attention of this Court to the notice issued under section 148A(b)
of the said Act for the assessment year 2017-18 dated 23rd March 2024 would
submit that the basis for issuing of such notice was an alleged credible
information received in high risk transactions module that the assessee had
undertaken the transaction amounting to Rs.24,88,29,320/- during the
assessment year 2017-18. Along with the aforesaid notice, the information
and materials relied on were also attached, which according to the
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department, suggested that the income chargeable to tax had escaped the
assessment as per the particulars provided therein. Mr. Sen has since
highlighted in detail not only the extract of investigation report but also the
response given by the petitioners and attempted to clarify that the three
entities who were alleged to have transacted with the petitioners as had been
identified in the extract of investigation report had in fact no transactions with
the petitioners during the relevant period. The aforesaid would be apparent
from the response wherein the petitioners had duly disclosed the audited
accounts to substantiate that there had been no transaction with M/s.
Solvent Vyapaar Private Limited. Insofar as M/s. Casio Vintrade Private
Limited and M/s. Corum Securities Private Limited are concerned, there had
been no transaction as well. According to the petitioners, the Assessing Officer
did not appropriately consider the petitioners' response and had mechanically
passed the order under Section 148A(d). Mr. Sen would submit that the
approach of the Assessing Officer in mechanically disposing of the petitioners'
response vitiates the order itself and in support of his aforesaid contention he
has relied on the following judgments:
(i) Somnath Dealtrade Pvt. Ltd. v. Union of India & Others,
reported in 2022 SCC Online Cal 4492 : (2023) 455 ITR 720
(ii) Mustafa Huseni Chunawala v. The Union of India & Ors. passed
in APOT/114/2022 and IA No. GA/1/2022
3. Per contra, Mr. Bhattacharjee, learned Advocate representing the
department would submit that admittedly in this case, the petitioners were
afforded with opportunity not only to respond but with an opportunity of
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hearing as well. According to him, it is not the case of the petitioners that
there has been non-compliance of the principles of natural justice. The
assessing officer had duly considered the response filed by the petitioners and
only thereafter had passed the order under Section 148A(d) of the said Act.
4. He would further submit that the order passed by the assessing officer is a
well reasoned order. In such order, he has clarified that the assessee has not
submitted bank statements of all the bank accounts from where various
receipts in the hands of the company can be verified. According to him, the
assessing officer has categorically noted the petitioners' response and has
thereafter decided to reopen the assessment by passing an order under
Section 148A(d) of the said Act and by issuing a consequential notice under
Section 148 of the said Act. There is no irregularity in the order although,
according to him, the proposition of law in the above judgments relied on by
Mr. Sen is not in question, however, such judgments do not assist the
petitioners' case. Further if this Court is to accept the challenge of this nature
then the machinery provided for re-assessment would fail. The petitioners are
not remediless. The issuance of notice under section 148 of the said Act only
permits the assessing officer to reopen the assessment. The petitioners cannot
be permitted to stall the proceedings. The scheme of the Act provides for
enabling an assessee with further opportunity in the reassessment
proceedings and it is only thereafter that the assessing officer is likely to take
a decision and may either, in the facts, drop the proceedings or if he is of the
opinion that a variation is necessary, due prior notice in this regard would be
again served, having regard thereto, no interference is called for at this stage.
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5. Heard the learned Advocates appearing for the respective parties and
considered the materials on record. Prima facie, it appears that the notice
under Section 148A(b) of the said Act dated 23rd March, 2024 has been issued
in respect of the assessment year 2017-18. In the said notice amongst others,
it has been highlighted that from the information and materials available, it
would transpire that income chargeable to tax has escaped assessment. The
petitioners have duly responded to the same and in the response have also
extracted the investigation report relied on by the department. The relevant
portion of the reply which extracts the investigation report and the relevant
part of the response which deals with such report are extracted hereinbelow:-
"Reply Castle Suppliers, AY: 2017-18
Extract of Investigation Report dated NIL
2. Certain other details of the Company has also been provided in the information.
These include its PAN and Bank Account Number. Financial Analysis of M/s Castle
Suppliers Private Limited is as follows:
F.Y. Share Securities Borrowings Total Investment Loans &
Capital Premium Equities s in Advances
Reserve & Unlisted
Liabilities Equities
2013 - 9700000 193127000 33695343 343138536 195664242 9309000
2014
2014 - 9700000 193127000 33695343 366571381 245469272 12372759
2015
2015 - 9700000 193127000 17000000 326629530 248829320 22372759
2016
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2016 - 9700000 193127000 89473600 347895505 0 34872759
2017
2017 - 9700000 193127000 35971856 336567445 157129161 19317000
2018
3. It may kindly be seen from the abovementioned Financial Analysis of M/s Castle
Suppliers Private Limited that there has been Sale of Unlisted Equities from its
Asset amounting to 24,88,29,320/- during F.Y. 2016-2017 and proceeds of this
Sale has been invested in giving loans. Accordingly, in order to corroborate it,
Statement of Company's o HDFC Bank Account number 01052560002804 was
procured. Soft copy of this Ban. Statement is placed in this file in the accompanying
Pen Drive. An analysis of this accoun shows considerable transactions with many
Entities, including many suspicious entities These entities include M/s Casio
Vintrade Private Limited, M/s Solvent Vyapaar Privat Limited, M/s Corum
Securities Private Limited and others.
4. In order to verify the genuineness of Sale of Unlisted Equities from the books of M
Castle Suppliers Private Limited, a summon dated 27/10/2021 under Section 131
of th Income-tax Act, 1961 was sent to the Company, which has remained
unanswered, there leaving the issue suspicious.
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The information itself is un-substantiated, unverified and unfounded. The
investigation report has stated nature of enquiry as ‘Open enquiry’ thus as
jurisdictional Assessing Officer should ought to make further enquiry and should
not based the opinion on 3rd party allegations “from credible sources” which are
also unidentified ones.
It is worthwhile to mention that Casio Vintrade Pvt Ltd. And Solvent
Vyapaar Pvt Ltd. are the group Companies of the assessee. In the year under
consideration there is no transactions with Casio Vintrade Pvt Ltd and Corum
Securities Private Limited. The Ledger account of FY 2016-17 (AY 2017-18) of
Solvent Vyapaar Pvt Ltd is enclosed for reference. Please note there is no
transaction during the year with said company.
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It is pertinent to mention that these entities Casio Vintrade Pvt Ltd. And
Solvent Vyapaar Pvt Ltd were subject to scrutiny assessment u/s. 143(3) of the Act
by respective JAO for relevant AY 2017-18 and there is no adverse or doubt about
the identity creditworthiness or business activities about any of them. The master
data as per ROC records of their entities are also enclosed. The documents will
enable you to frame a rationale opinion and reasonable belief about the association
of the assessee and their standing.
We are also submitting the detailed bank books with bank statement. We
seek an opportunity for personal hearing to explain the facts with
documentary evidences before your kind self.”
6. I find as rightly pointed out by Mr. Bhattacharya, representing the
respondents, that the assessing officer had afforded opportunity of hearing to
the petitioner and, prima facie, there does not appear to be violation of the
principles of natural justice. It may, however, be noted that having regard to
the safeguards provided in reopening the assessment, as is apparent from the
scheme of section 148 of the said Act, and post the notification of the Finance
Act 2021, w.e.f. 1st April 2021, ordinarily, the assessment cannot be reopened
unless the provisions of Section 148A of the said Act which incorporates in
itself safeguards provided for reopening are complied with. As would appear
from the provisions of Section 148 of the said Act that the same deals with the
issue of notice where income has escaped assessment. Section 148A deals
with the procedure for conducting enquiry, providing ample opportunity prior
to issuance of the notice under section 148 of the said Act. As it would further
appear from section 148A that the assessing officer, before issuing the notice,
can either conduct an enquiry, if required, with prior approval of the specified
authority having regard to the information which suggests that income
chargeable to tax has escaped assessment. The other option available is under
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clause (b) of section 148A, which suggests that the assessing officer shall,
before issuing any notice under section 148, provide an opportunity of being
heard to the assessee with a prior approval of the specified authority by
serving him a notice to show cause within such time as may be specified in
the notice. The provisions of Section 148A(c) provides for furnishing of reply
by the assessee while the provisions of section 148(d) of the said Act provide
that the assessing officer shall decide on the basis of the materials available
on record, including the 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 the specified authority within one month from the end of the month in
which the reply referred to in clause (c) is received by him, or where no such
reply is furnished, within one month from the end of the month in which time
or extended time allowed to furnish a reply as per clause (b) expires.
7. Admittedly, in this case, a notice under section 148A(b) was issued. As
such, it was obligatory on the part of the assessing officer, having regard to
the scheme of the said Act and the provisions contained in section 148A(d) of
the said Act to decide on the basis of the materials available on record,
including the reply of the assessee, whether or not it was a fit case to issue a
notice under section 148 of the said Act.
8. Admittedly, I find that in the instant case, the assessing officer has
concluded that the claim of the assessee is not acceptable in the light of the
information provided by the Investigation Directorate. It has further proceeded
to hold that the information received from the investigation wing cannot be
fully cross-verified with meagre submission made by the assessee. I,
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however, notice that apart from the aforesaid, no reasons whatsoever has
been provided by the assessing officer to dislodge the case made out by the
petitioners. Since appropriate safeguards have been provided for in section
148A of the said Act and since an opportunity to respond is provided, in my
view, such opportunity should be a meaningful opportunity and not mere
rejection of the response filed by the assessee, as not being accepted in the
light of the information available by them. If the assessing officer was to reject
the contention of the petitioner, appropriate reasons as to why the same was
found to be unacceptable ought to have been quoted. The assessing officer has
chosen not to discredit the audited accounts of the petitioner while
considering the response. In this context, it may be noted that the Hon’ble
Division Bench of this Court, in the judgments delivered in the case of
Somnath Dealtrade Pvt.Ltd. (supra) and in the case of Mustafa Huseni
Chunwala (supra) has clearly concluded that there should be a meaningful
and effective opportunity of hearing and not an empty formality. The assessing
officer ought not to have dismissed the response filed by the petitioner by
holding out the same not to be acceptable without the same being
substantiated by reasons.
9. In the light of the above, I am of the view that the order impugned and the
notice under Section 148 cannot be sustained, the same are accordingly set
aside and the matter is remanded back to the assessing officer for a fresh
decision on merits.
10. The assessing officer, before passing an order under Section 148A(d) of the
said Act, shall give an opportunity of hearing to the petitioner and shall deal
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with the response filed by the petitioner in a meaningful manner having
regard to the observations made hereinabove.
11. It is made clear that the above decision shall be taken within a period of
one month from the date of communication of this order.
12. The petitioner is also directed to cooperate with the assessing officer by
producing documents as and when called for.
13. With the above observations and directions, the writ petition stands
dispose of.
14. There shall be no order as to costs.
(RAJA BASU CHOWDHURY, J.)
R. Bose/akg/