Madras High Court
M.K.Rajagopalan vs The Deputy Commissioner Of Income-Tax on 20 February, 2025
Author: C.Saravanan
Bench: C.Saravanan
2025:MHC:1323
W.P.No.6068 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved On 06.09.2024
Pronounced On 20.2.2025
CORAM :
THE HONOURABLE MR.JUSTICE C.SARAVANAN
W.P.No.6068 of 2022
and
W.M.P.Nos.6152 and 6153 of 2022
M.K.Rajagopalan ... Petitioner
Vs.
1.The Deputy Commissioner of Income-tax,
Central Cir 3(4),
3rd Floor,
Investigation Building,
No.46 (Old No.108),
Mahatma Gandhi Road,
Chennai,
Tamil Nadu – 600 034.
2.Pr.CIT (Central), Chennai -1
Room No.301, New Building-III Floor,
Investigation Building,
No.46 (Old No.108),
Mahatma Gandhi Road,
Chennai,
Tamil Nadu – 600 034. ... Respondents
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W.P.No.6068 of 2022
Prayer: Writ Petition filed under Article 226 of the Constitution of India for
issuance of a Writ of Certiorari, to call for the records in DIN
No.ITBA/AST/S/148/2020-21/1032079001(1) dated 31.03.2021 on the file of
the 1st respondent for the Assessment Year 2013-14 and the consequential order
in DIN No.ITBA/AST/F/17/2021-22/1040217067(1) dated 01.03.2022 on the
file of the 1st respondent for the Assessment Year 2013-14 and quash the same.
For Petitioner : Mr.R.V.Easwar
Senior Counsel
for
M/s.R.Sandeep Bagnar
For Respondents : Mr.A.P.Srinivas
Senior Standing Counsel
ORDER
The Petitioner is before this Court against the Impugned Notice dated
31.03.2021 issued under Section 148 of the Income Tax Act, 1961 for the
Assessment Year 2013-2014 and the Order dated 01.03.2022 passed by the
Assessing Officer, disposing of the objection of the Petitioner.
2. Operative Portion of the Impugned Order dated 01.03.2022 reads as
under:-
“2. Assessee has stated that “the reasons recorded are
incomplete, as it has not been pointed out in which document
belongint to M/s.MKR Enterprises, viz. Book of account or bank2/32
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W.P.No.6068 of 2022account, the impugned accommodation entries are appearing”.
The above statement appears to be a premature submission.
The submission is more suitable after the completion of assessment
proceedings. Assessee has forgotten the fact that the case has been
reopened for the purpose of conducting detailed enquiry based on
actionable information received by this office, after providing
reasonable opportunities to the assessee. This office has received
a confirmed information that assessee has involved in bogus
transactions with in accommodation entry provider in Kolkata.
However, assessee is provided an opportunity is prove its
genuineness through the proceedings. Therefore, simply stating
that assessee has not involved in any transaction with the parties
mentioned in the reasons or trying to prove the genuineness of the
parties (Nectar Dealtrade Pvt. Ltd. & Moonview Vintrade Pvt.
Ltd.) can never be a cause of objection. Assessee can submit the
same with documentary evidence which would only substantiate its
claim.
It was in the welfare of assessee that a detailed
questionnaire u/s 142(1) of the Income Tax Act, 1961, was served
to prove its state. However, till date no submission has been made,
rather such baseless objections are being raised only with the
intention of derailing the proceedings.
And it is also to be clarified here that the proceedings are
not initiated merely to verify the genuineness, but to provide the
assessee a fair chance to represent itself against the findings.
Nevertheless, the reasons recorded are based on concrete
information from ADIT, Kolkata, who has fairly proved that the
parties involved are shell companies.”
3. The Impugned Notice dated 31.03.2021 appears to have been digitally
signed at around 5.14 p.m., and was received by the Petitioner on the following
day on 01.04.2021 at around 7.16 a.m.
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W.P.No.6068 of 2022
4. The reasons for reopening the assessment were furnished to the
Petitioner vide Notice dated 15.11.2021 issued under Section 142 (1) of the
Income Tax Act, 1961. The reasons stated in the aforesaid Notice dated
15.11.2021 reads as under:-
“Your case has been selected for scrutiny for the Assessment
Year 2013-2014 by issuing notice u/s 148 dated 31.03.2021.
Reasons for the same are stated as follows:
It is found that Shri Rajagopalan [MKR Enterprises
(AAEPR4969B)] with a total information value of Rs.1.25 Cr in
respect of accommodation entries from shell entities namely Nectar
Deal Trade Private Ltd. (PAN: AADCN5751F) and Moonview
Vintrade Private Ltd. (AAHCN7679K).
The information received in respect of above companies
reveal that the status of both the companies as per MCA is ‘strike
off’. Financial analysis of the said concern establish that these are
paper/jamakharchi concerns and do not have credit worthiness to
do that quantum of transactions they have done. They were being
solely used to provide accommodation entry.”S. Source PAN Source PAN Informa Inform Informa Remarks
No Name tion FY ation tion
Type value
1 AADCN5751F Nectar 2012-13 Others 5000000 Accommodation
Dealtrade entry taken
Private Limited
2 AAHCM7679K Moonview 2012-13 Others 7500000 Accommodation
Vintrade Pvt entry taken
Ltd
3 AAHCM7679K Moonview 2012-13 Others 7500000 Accommodation
Vintrade Pvt entry taken
LtdIn this regard, you are required to furnish:
1.Details of sources of income derived by you (with a
detailed note) under each heads of income as provided u/s 14 of the4/32
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W.P.No.6068 of 2022
2.Details of income not includible in total income and which
is claimed as exempt income, derived by you with a detailed note
of income as provided u/s 10 of the IT Act, 1961.
3.Cash flow statement for the previous year 2012-13.
4.Copies of all bank account (including deposits) held and
operated by your including the accounts operated as a power
attorney holder of any other person with account no’s, name of the
bank and its branch.
5.Details of books of accounts maintained for the different
source of income derived.
6.Furnish a hard copy of P&L, Balance Sheet and Schedules.
7.Detailed note on business activities/investments/loan
happened/made/given to M/s.Nectar Dealtrade Private Limited and
M/s.Moonview Vintrade Private Limited during the year under
consideration.
8.You are required to furnish a copy of Rol filed for the
A.Y.2011-12 and 2012-13.”
5. The Petitioner appears to be a proprietor of a Petrol Bunk under the
name and style of M/s.MKR Enterprises, engaged in the sale of petroleum
products and a Trustee of M/s.Sri Balaji Educational and Charitable Public
Trust.
6. The dispute in this case pertains to the Assessment Year 2013-2014. It
is the case of the Petitioner that the Notice dated 31.03.2021 issued under
Section 148 of the Income Tax Act, 1961 was time barred even if the extensions
provided under the Taxation and Other Laws (Relaxation and Amendment of
Certain Provisions) Ordinance, 2020 and the Taxation and Other Laws
(Relaxation & Amendment of Certain Provisions) (‘TOLA’) Act, 2020 were
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W.P.No.6068 of 2022applied.
7. It is submitted that the Impugned Notice dated 31.03.2021 issued under
Section 148 of the Act has been issued in a hurry as the time for completing the
assessment would have expired on 31.03.2021 after the Taxation and Other
Laws (Relaxation & Amendment of Certain Provisions) (‘TOLA’) Act, 2020
extensions.
8. The further case of the petitioner is that the discretion provided for
reopening the assessment after the assessment was completed under Section
143(1) of the Income Tax Act, 1961, there was no case made out for
escapement of income warranting invocation under Section 148 of the Income
Tax Act, 1961.
9. Learned Senior Counsel for the petitioner would submit that the
impugned proceeding was without jurisdiction and it was beyond the period of
limitation prescribed under Section 149 of the Income Tax Act, 1961 as it stood
then.
10. It is submitted that there was no tangible material available for
reopening the assessment barring a bald assertion that the petitioner had resorted
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W.P.No.6068 of 2022to jamakharchi transaction.
11. It is submitted that there are no records to substantiate that the
petitioner had received any amounts by way of accommodation during the
Financial Year 2012-2013 for a sum of Rs.50,00,000/- from M/s.Nectar
Dealtrade Private Limited and Rs.75,00,000/- from M/s.Moonview Private
Limited.
12. In this connection, the learned Senior Counsel for the petitioner has
placed reliance on the following decisions of the Division Bench of the
Allahabad High Court, Madhya Pradesh High Court and the Delhi High Court:
i. Daujee Abhushan Bhandar Private Limited Vs. Union of India and
two others in Writ Tax No.78 of 2022 dated 10.03.2022.
ii. Yuvraj Vs. Income Tax Officer and others in Writ Petition No.28293
of 2021 dated 03.03.2022.
iii. Sharad Garg Vs. Income-tax Officer, [2022] 136 taxmann.com 360
(Delhi).
13. Learned Senior Counsel has also drawn attention to the following
decisions of the Division Bench of the Delhi High Court and Bombay High
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W.P.No.6068 of 2022
Court:
i. Gudwala and Sons Vs. Assistant Commissioner of Income-tax, [2023]
155 taxmann.com 400 (Delhi).
ii. Banas Finance Limited Vs. Assistant Commissioner of Income-tax,
Central Circle-8(3), [2024] 160 taxmann.com 559 (Bombay).
iii. Dr.Ajit Gupta Vs. Assistant Commissioner of Income-tax, [2017] 79
taxmann.com 316 (Delhi).
iv. Principal Commissioner of Income-tax-6 Vs. Meenakshi Overseas
(P.) Ltd., [2017] 82 taxmann.com 300 (Delhi).
v. Principal Commissioner of Income-tax-4 Vs. G & G Pharma India
Ltd., [2017] 81 taxmann.com 109 (Delhi).
vi. Arvind Sahdeo Gupta Vs. Income-tax Officer, [2023] 153
taxmann.com 244 (Bombay).
14. In Daujee Abhushan Bhandar Private Limited case (referred to
supra), the learned Senior Counsel has referred to the following passages found
in Paragraphs 17, 20 and 29, which reads as follows:-
“17. Rule 127A(1) of the Rules, 1962 provides that every
notice or other document communicated in electronic form by
an authority under the Act shall be deemed to be authenticated
in case of electronic mail or electronic mail message (e-mail) if
the name and office of such income tax authority is printed on
the e-mail body, if the notice or other document is in the e-mail8/32
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W.P.No.6068 of 2022body itself, or is printed on the attachment to the e-mail, if the
notice or other document is in the attachment and the e-mail, is
issued from the designated e-mail address of such income tax
authority. Thus, the issuance of notice and other document
would take place when the e-mail is issued from the designated
e-mail address of the concerned income tax authority.
18. …..
19. …..
20. Thus, after digitally signing the notice the income tax
authority has to issue it to the assessee either in paper form or
through electronic mail. Sub-Section (1) of Section 13 of the
Act, 2000 provides that dispatch of an electronic record occurs
when it enters a computer resource outside the control of the
originator. The aforesaid Sub-Section (1) of Section 13
indicates the point of time of issuance of notice. Therefore, after
a notice is digitally signed and when it is entered by the income
tax authority in computer resource outside his control i.e., the
control of the originator then that point of time would be the
time of issuance of notice.
21. …..
29. Thus, considering the provisions of Section 282 and
282A of the Act, 1961 and the provisions of Section 13 of the
Act, 2000 and meaning of the word “issue” we find that firstly
notice shall be signed by the assessing authority and then it has
to be issued either in paper form or be communicated in
electronic form by delivering or transmitting the copy thereof to
the person therein named by modes provided in section 282
which includes transmitting in the form of electronic record.
Section 13(1) of the Act, 2000 provides that unless otherwise
agreed, the dispatch of an electronic record occurs when it
enters into computer resources outside the control of the
originator. Thus, the point of time when a digitally signed
notice in the form of electronic record is entered in computer
resources outside the control of the originator i.e., the assessing
authority that shall the date and time of issuance of notice under
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W.P.No.6068 of 2022
Section 148 read with Section 149 of the Act, 1961.”
15. In Yuvraj case (referred to supra), the learned Senior Counsel has
referred to the following passages found in Paragraphs 5 to 8, which reads as
follows:-
“5. The counsel for the parties were heard and during
the course of hearing, the counsel for respondent/revenue Shri
Sanjay Lal produced a letter dated 24/02/2022 bearing no.1002
issued by Income Tax Officer-3(1) of Bhopal which was
addressed to the counsel for the revenue and in the said letter it
was stated that though in the notice which was issued to the
petitioner herein, the date was mentioned as 31/03/2021 but, the
system of the office of the respondents revealed that the Email to
the petitioner was infact sent on 16/04/2021. Thus, the counsel
for respondent does not dispute that the notice which is
impugned in the petition contained in Annexure P/1 infact was
issued on 16/04/2021 though the date on the same was
mentioned as 31/03/2021 but was issued later on 6/04/2021.
6. In view of the aforesaid letter so produced before us
dated 24/02/2022 and in view of the admission by the counsel
for respondents, we have no hesitation to hold that the impugned
notice is bad in the eye of law, contained in Annexure P/1 dated
31/03/2021 (received by the petitioner on 16/04/2021 through
Email) inasmuch as after 1/04/2021, it is mandatory
requirement that prior to re-assessment proceedings notice
under Section 148-A of the Income Tax Act, 1961 should be
issued to assessee. Since now in view of the admission by the
respondents the other reliefs as sought for by the petitioner in
the relief clause have become redundant inasmuch as now there
is no dispute about the date of issuance of the impugned notice.
7. Accordingly, the impugned notice dated 31/03/2021
(served through Email to the petitioner on 16/04/2021) stands
quashed. However, it is left open for the respondents to take10/32
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W.P.No.6068 of 2022recourse to the procedure laid down in newly enacted Section
148-A of the Income Tax Act, 1961 if it is required under the
law.
8. Thus, the writ petition stands allowed to the extent
indicated above.”
16. In Sharad Garg case (referred to supra), the learned Senior Counsel
has referred to the following passages found in Paragraphs 2, 3 and 4, which
reads as follows:-
“2. It is pertinent to mention that the Allahabad High
Court in Daujee Abhushan Bhandar (P.) Ltd. Vs. Union of
India, [2022] 136 taxmann.com 246 has held as under:-
“29. …. Section 13(1) of the Act, 2000 provides
that unless otherwise agreed, the dispatch of an
electronic record occurs when it enters into computer
resources outside the control of the originator. Thus,
the point of time when a digitally signed notice in the
form of electronic record is entered in computer
resources outside the control of the originator i.e.,
the assessing authority that shall the date and time of
issuance of notice under Section 148 read with
Section 149 of the Act, 1961.
30. In view of the discussion made above, we
hold that mere digitally signing the notice is not the
issuance of notice. Since the impugned notice under
Section 148 of the Act, 1961, was issued to the
petitioner on 6-4-2021 though e-mail, therefore, we
hold that the impugned notice under Section 148 of
the Act, 1961 is time barred. Consequently, the
impugned notice is quashed.
………”.
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W.P.No.6068 of 2022
3. Keeping in view the aforesaid Judgment, this Court is
of the view that the present batch of matters requires detailed
examination.
4. As the deadline for passing the assessment order in
most of the cases is 31st March, 2022, this Court is of the view
that it would not be possible to pass a judgment prior thereto.
Accordingly, proceedings pursuant to the impugned
reassessment notices are stayed till further orders.”
17. Specifically, the learned Senior Counsel for the petitioner would
submit that as per Section 149 of the Income Tax Act, 1961, no notice under
Section 148 of the Income Tax Act, 1961 shall be issued for the relevant
Assessment Year. Section 149 of the Income Tax Act, 1961 reads as under:-
“149. Time limit for notice:
[(1) No notice under section 148 shall be issued for the
relevant assessment year,—
[(a) if three years have elapsed from the end of the relevant
assessment year, unless the case falls under clause (b);
(b) if three years, but not more than ten years, have elapsed
from the end of the relevant assessment year unless the Assessing
Officer has in his possession books of account or other documents
or evidence which reveal that the income chargeable to tax,
represented in the form of –
i. an asset;
ii. expenditure in respect of a transaction or in relation to an
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W.P.No.6068 of 2022
event or occasion; or
iii. an entry or entries in the books of account,
which has escaped assessment amounts to or is likely to
amount to fifty lakh rupees or more.”
18. That apart, the learned Senior Counsel for the petitioner would also
submit that even in the impugned order, the Officer has not given any tangible
information that was available for invoking jurisdiction under Section 148 of the
Income Tax Act, 1961.
19. As far as limitation is concerned, the learned Senior Counsel also
drew attention to the Counter Affidavit in Paragraph 12 where, there is an
admission that notice was signed on 31.03.2021 and therefore, it cannot be said
that the notice was issued within the period of limitation which expired on
31.03.2020.
20. Learned Senior Counsel for the petitioner also submits that the burden
of proof was on the Income Tax Department to show that the petitioner has
received amounts from the above two mentioned entities.
21. Learned counsel for the petitioner fairly submitted that the decision of
the Allahabad High Court in Daujee Abhushan Bhandar Pvt.Ltd., vs. Union
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W.P.No.6068 of 2022
of India and 2 Others, Writ Tax.No.78 of 2022 has been differed by the First
Court of this Court in Malavika Enterprises vs. Central Board of Direct Taxes
2022 468 ITR 651 wherein in para 23 reads as under :-
23.The paragraphs referred to above show the manner of
issuance of notice by electronic mode and when it would
be taken to have been issued, but then the judgment was
rendered in reference to the date of receipt of the notice,
without showing that after the notice was digitally signed
on March 31, 2021, it was not sent being entered by the
Income-tax authority in computer resource outside his
control. Thus, with due respect to the Division Bench of
the Allahabad High Court, the conclusions finally drawn
on the facts of that case cannot be applied, rather we
cannot change the language of the provision by changing
the word “issuance” to that of “receipt”.
22. However, it could not preclude the application of Section 13(1) and
13(2) of the Information Technology Act, 2000.
23. It is fairly submitted that there is no definition for the expression the
issue has used in Section 149 of the Income Tax Act, 1961. It is therefore
submitted that under Section 13(1) of the Income Tax Act, 2000 which has been
made applicable for service of notice in terms of Section 282 of the Income Tax
Act, 1961, the time in place of dispatch of an electronic record occurs when it
enters a computer resource outside his control i.e the control of the originator as
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W.P.No.6068 of 2022
per Section 13(1) of the Income Tax Act, 2000.
24. It is submitted that the definition of expression ‘originator’ has been
defined Section 2 (za) of the Information Technology, Act, 2000 to mean that a
person who sends, generates, stores or transmits any electronic message or
causes any electronic message to be sent, generated, stored or transmitted to any
other person but does not include an intermediary.
25. It is submitted that mere affixing of Digital signature cannot be said to
satisfy the requirement of Section 149 of the Income Tax Act, 1961 as it stood
during the period in dispute.
26. That apart, learned Senior Counsel for the Petitioner drew attention to
the decision of the Hon’ble Supreme Court in Chhugamal Rajpal v. S.P. Chaliha,
(1971) 1 SCC 453.
27. It is submitted that the case dealt with almost identical situation where
the Income Tax Officer in his report, the Income Tax Officer does not set out
any reason for coming to the conclusion that this is a fit case to issue notice
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W.P.No.6068 of 2022
under Section 148. The material that he had before him for issuing notice under
Section 148 is not mentioned in the report. In his report he vaguely refers to
certain communications received by him from the CIT, Bihar and Orissa.
28. It is submitted that it is almost similar reasons given for reopening of
the assessment in this case and therefore submitted that it cannot be said that the
officer has sufficient reasons for reopening the assessment.
29. Learned Senior Standing counsel for the respondents also clarified
and stated that drew attention to para 9 of the affidavit filed in support of the
writ petition. It is also submitted that there are no tangible evidence available
to show that the petitioner had made any entry to indicate that there were
transactions with the above named companies namely Nector Dealtrade Private
Limited and Moonview Vintrade Pvt.Ltd are shell companies, itself is not fully
correct.
30. Learned Senior Standing counsel for the respondent/revenue would
submit that the sufficiency of the satisfactory is not a matter which has to be
gone into. The insight portal of the Income Tax Officer has flagged information
under the category ‘ High Risk CRIU/VRU information’ in the case of
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W.P.No.6068 of 2022
Shri.Rajagopalan (MKR Enterprises ( AAEPR4969B) with a total information
value of Rs.1.25 Crore in respect of accommodation entries from shell entities
namely Nector Dealtrade Private Limited and Moonview Vintrade Pvt.Ltd. The
information received from the Office of the ADIT(Inv), Unit-1(1), Kolkata in
respect of above companies reveal that the status of both the companies as per
MCA is strike off. Financial analysis of the said concern establish that these
are paper/jamakharchi concerns and do not have credit worthiness to do that
quantum of transactions they have done. They were being solely used to
provide accommodation entry. In the above said impugned order and therefore
it can be said sufficient information that was available for the reopening the
assessment.
31. I have considered the arguments advanced by the learned Senior
Counsel for the petitioner and the learned Senior Standing Counsel for the
respondent.
32. Learned Senior Standing Counsel for the respondent has drawn
attention to the following decisions :-
i) Sri Krishna (P.) Ltd, vs. Income-Tax Officer, (1996) 87
Taxman 315 (SC), it reads as under :-
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W.P.No.6068 of 2022Now, what needs to be emphasised is that the
obligation on the assessee to disclose the material facts _
or what are called, primary facts_is not a mere disclosure
but a disclosure which is full and true. A false disclosure is
not a true disclosure. The disclosure must not only be true
but must be full _ “fully and truly”. A false assertion, or
statement, of material fact, therefore, attracts the
jurisdiction of the Income-tax Officer under section
34/147. Take this very case : the Income-tax Officer says
that on the basis of investigation and enquiries made
during the assessment proceedings relating to the
subsequent assessment year, he has come into possession
of material, on the basis of which, he has reasons to
believe that the assessee had put forward certain bogus and
false unsecured hundi loans said to have been taken by
him from non-existent persons or his dummies, as the case
may be, and that on that account income chargeable to tax
has escaped assessment. According to him, this was a false
assertion to the knowledge of the assessee. The Income-tax
Officer says that during the assessment relating to the
subsequent assessment year, similar loans [from some of
these very persons] were found to be bogus. On that basis,
he seeks to reopen the assessment. It is necessary to
remember that we are at the stage of reopening only. The
question is whether, in the above circumstances, the
assessee can say, with any justification, that he had fully
and truly disclosed the material facts necessary for his
assessment for that year. Having created and recorded
bogus entries of loans, with what face can the assessee say
that he had truly and fully disclosed all material facts
necessary for his assessment for that year. True it is that
the Income-tax Officer could have investigated the truth of
the said assertion _ which he actually did in the subsequent
assessment year _ but that does not relieve the assessee of
his obligation, placed upon him by the statute, to disclose
fully and truly all material facts. Indubitably, whether
a loan, alleged to have been taken by the assessee, is true
or false, is a material fact_and not an inference, factual or
legal, to be drawn from given facts. In this case, it is
shown to us that ten persons [who are alleged to have
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W.P.No.6068 of 2022advanced loans to the assessee in a total sum of Rs.
3,80,000 out of the total hundi loans of Rs. 8,53,298] were
established to be bogus persons or mere name-lenders in
the assessment proceedings relating to the subsequent
assessment year. Does it not furnish a reasonable ground
for the Income-tax Officer to believe that on account of the
failure _ indeed not a mere failure but a positive design to
mislead _ of the assessee to disclose all material facts,
fully and truly, necessary for his assessment for that year,
income had escaped assessment ? We are of the firm
opinion that it does. It is necessary to reiterate that we are
now at the stage of the validity of the notice under section
148/147. The enquiry at this stage is only to see whether
there are reasonable grounds for the Income-tax Officer to
believe and not whether the omission/failure and the
escapement of income is established. It is necessary to
keep this distinction in mind.
A recent decision of this court in Phool Chand Bajrang Lal
v. ITO [1993] 203 ITR 456, we are gratified to note,
adopts an identical view of law and we are in respectful
agreement with it. The decision rightly emphasises the
obligation of the assessee to disclose all material facts
necessary for making his assessment fully and truly. A
false disclosure, it is held, does not satisfy the said
requirement. We are also in respectful agreement with the
following holding in the said decision (page 477) :
“Since the belief is that of the Income-tax Officer, the
sufficiency of reasons for forming the belief is not for the
court to judge but it is open to an assessee to establish that
there in fact existed no belief or that the belief was not at
all a bona fide one or was based on vague, irrelevant and
non-specific information. To that limited extent, the court
may look into the conclusion arrived at by the Income-tax
Officer and examine whether there was any material
available on the record from which the requisite belief
could be formed by the Income-tax Officer and further
whether that material had any rational connection or a live
link for the formation of the requisite belief. “19/32
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ii) ITO v. Purushottam Das Bangur, (1997) 3 SCC 253, it reads as
under:-
10. The High Court has proceeded on the basis that the
said letter of Shri Bagai did not contain any information
and that there was neither evidence of manipulation nor
evidence or collusive transactions referred to in the letter
and that no inquiries were made by the Income Tax
Officer after the receipt of the letter so as to constitute
information. We are unable to agree with the said view of
the High Court. The contents of paragraph 2 of the letter
of Shri Bagai refer to the statement containing financial
information regarding Maharaja Shree Umaid Mills Ltd.
which was annexed to the letter of Shri Bagai. The said
statement contained information derived from the
Bombay Stock Exchange Directory about the financial
condition of Maharaja Shree Umaid Mills Ltd. during the
period 1965-70 which indicated that during this period
the company has prospered and that the book value per
equity share had risen from Rs 318.55 for the year ending
31-12-1965 to Rs 401 for the year ending 31-12-1970, the
earning per share rose from Rs 8.37 per share to Rs 44 per
share and that dividend percentage had also risen from
2% to 10% for the same period .
11.On the basis of the information contained in the letter
of Shri Bagai and the documents annexed to it, the
Income Tax Officer could have had reason to believe that
the fair market value of the shares was far more than the
sale price and the market quotations from Calcutta Stock
Association shown by the assessee at the time of original
assessment were manipulated ones and as a result income
chargeable to tax had escaped assessment. It could not be
said that the information that was contained in paragraph
2 of the letter of Shri Bagai was not definite information
and it could not be acted upon by the Income Tax Officer
for taking action under Section 147(b) of the Act.
iii)R.K. Upadhyaya v. Shanabhai P. Patel, (1987) 3 SCC 96, it
reads as under :-
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2……..Section 34 conferred jurisdiction on the Income
Tax Officer to reopen an assessment subject to service
of notice within the prescribed period. Therefore,
service of notice within limitation was the foundations
of jurisdiction. The same view has been taken by this
Court in J.P. Janni, ITO v. Induprasad D. Bhatt [AIR
1964 SC 1742 : (1964) 7 SCR 539 : 72 ITR 595] as also
in CIT v. Robert J. Sas [AIR 1964 SC 1742 : (1964) 7
SCR 539 : 48 ITR 177] . The High Court in our opinion
went wrong in relying upon the ratio of Banarsi
Debi v. ITO [AIR 1964 SC 1742 : (1964) 7 SCR 539 :
53 ITR 100] in disposing of the case in hand. The
scheme of the 1961 Act so far as notice for
reassessment is concerned is quite different. What used
to be contained in Section 34 of the 1922 Act has been
spread out into three sections, being Sections 147, 148
and 149 in the 1961 Act. A clear distinction has been
made out between “issue of notice” and “service of
notice” under the 1961 Act. Section 149 prescribes the
period of limitation. It categorically prescribes that no
notice under Section 148 shall be issued after the
prescribed limitation has lapsed. Section 148(1)
provides for service of notice as a condition precedent
to making the order of assessment. Once a notice is
issued within the period of limitation, jurisdiction
becomes vested in the Income Tax Officer to proceed to
reassess. The mandate of Section 148(1) is that
reassessment shall not be made until there has been
service. The requirement of issue of notice is satisfied
when a notice is actually issued. In this case,
admittedly, the notice was issued within the prescribed
period of limitation as March 31, 1970, was the last day
of that period. Service under the new Act is not a
condition precedent to conferment of jurisdiction in the
Income Tax Officer to deal with the matter but it is a
condition precedent to making of the order of
assessment. The High Court in our opinion lost sight of
the distinction and under a wrong basis felt bound by
the judgment in Banarsi Debi v. ITO [AIR 1964 SC
1742 : (1964) 7 SCR 539 : 53 ITR 100] . As the Income21/32
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W.P.No.6068 of 2022Tax Officer had issued notice within limitations, the
appeal is allowed and the order of the High Court is
vacated. The Income Tax Officer shall now proceed to
complete the assessment after complying with the
requirements of law. Since there has been no
appearance on behalf of the respondents, we make no
orders for costs.
iv) Commissioner of Income Tax vs. Major Tikka
Khushwant Singh, (1995)212ITR 650 (SC)
v) Raymond Woollen Mills Ltd., vs. Income Tax Officer,
(1999) 236 ITR 34(SC)
vi) CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd., (2008) 14
SCC 208.
9.Section 147 authorises and permits the assessing officer
to assess or reassess income chargeable to tax if he has
reason to believe that income for any assessment year has
escaped assessment. The word “reason” in the phrase
“reason to believe” would mean cause or justification. If
the assessing officer has cause or justification to know or
suppose that income had escaped assessment, it can be
said to have reason to believe that an income had escaped
assessment. The expression cannot be read to mean that
the assessing officer should have finally ascertained the
fact by legal evidence or conclusion. The function of the
assessing officer is to administer the statute with
solicitude for the public exchequer with an inbuilt idea of
fairness to taxpayers.
20.As observed by the Delhi High Court (sic the
Supreme Court) in Central Provinces Manganese Ore Co.
Ltd. v. ITO [(1991) 4 SCC 166 : (1991) 191 ITR 662] for
initiation of action under Section 147(a) (as the provision
stood at the relevant time) fulfilment of the two requisite
conditions in that regard is essential. At that stage, the
final outcome of the proceeding is not relevant. In other
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words, at the initiation stage, what is required is “reason
to believe”, but not the established fact of escapement of
income. At the stage of issue of notice, the only question
is whether there was relevant material on which a
reasonable person could have formed a requisite belief.
Whether the materials would conclusively prove the
escapement is not the concern at that stage. This is so
because the formation of belief by the assessing officer is
within the realm of subjective satisfaction
[see ITO v. Selected Dalurband Coal Co. (P) Ltd. [(1997)
10 SCC 68 : (1997) 217 ITR 597] ; Raymond Woollen
Mills Ltd. v. ITO [(2008) 14 SCC 218 : (1999) 236 ITR
34] ]. 21. The scope and effect of Section 147 as
substituted with effect from 1-4-1989, as also Sections
148 to 152 are substantially different from the provisions
as they stood prior to such substitution. Under the old
provisions of Section 147, separate clauses (a) and (b) laid
down the circumstances under which income escaping
assessment for the past assessment years could be
assessed or reassessed. To confer jurisdiction under
Section 147(a) two conditions were required to be
satisfied, firstly, the assessing officer must have reason to
believe that income, profits or gains chargeable to income
tax have escaped assessment, and secondly, he must also
have reason to believe that such escapement has occurred
by reason of either omission or failure on the part of the
assessee to disclose fully or truly all material facts
necessary for his assessment of that year. Both these
conditions were conditions precedent to be satisfied
before the assessing officer could have jurisdiction to
issue notice under Section 148 read with Section 147(a)
but under the substituted Section 147 existence of only the
first condition suffices. In other words if the assessing
officer for whatever reason has reason to believe that
income has escaped assessment it confers jurisdiction to
reopen the assessment. It is however to be noted that both
the conditions must be fulfilled if the case falls within the
ambit of the proviso to Section 147. The case at hand is
covered by the main provision and not the proviso.
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vi)Phool Chand Bajrang Lal v. ITO, (1993) 4 SCC 77 , it reads as under
:-
24. Again, in A.L.A. Firm v. CIT [(1991) 2 SCC 558 :
(1991) 189 ITR 285] a three-Judge Bench of this Court,
to which one of us (S.C. Agrawal, J.) was a party, after
an elaborate discussion of the subject opined that the
jurisdiction of the Income Tax Officer to reassess
income arises if he has in consequence of specific and
relevant information coming into his possession
subsequent to the previous concluded assessment,
reason to believe, that income chargeable to tax had
escaped assessment. It was held that even if the
information be such that it could have been obtained by
the ITO during the previous assessment proceedings by
conducting an investigation or an enquiry but was not
in fact so obtained, it would not affect the jurisdiction
of the Income Tax Officer to initiate reassessment
proceedings, if the twin conditions prescribed under
Section 147 of the Act are satisfied.
25. From a combined review of the judgments of
this Court, it follows that an Income Tax Officer
acquires jurisdiction to reopen assessment under
Section 147(a) read with Section 148 of the Income
Tax Act, 1961 only if on the basis of specific, reliable
and relevant information coming to his possession
subsequently, he has reasons which he must record, to
believe that by reason of omission or failure on the part
of the assessee to make a true and full disclosure of all
material facts necessary for his assessment during the
concluded assessment proceedings, any part of his
income, profit or gains chargeable to income tax has
escaped assessment. He may start reassessment
proceedings either because some fresh facts come to
light which were not previously disclosed or some
information with regard to the facts previously
disclosed comes into his possession which tends to
expose the untruthfulness of those facts. In such
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situations, it is not a case of mere change of opinion or
the drawing of a different inference from the same facts
as were earlier available but acting on fresh
information. Since, the belief is that of the Income Tax
Officer, the sufficiency of reasons for forming the
belief, is not for the Court to judge but it is open to an
assessee to establish that there in fact existed no belief
or that the belief was not at all a bona fide one or was
based on vague, irrelevant and non-specific
information. To that limited extent, the Court may look
into the conclusion arrived at by the Income Tax
Officer and examine whether there was any material
available on the record from which the requisite belief
could be formed by the Income Tax Officer and further
whether that material had any rational connection or a
live link for the formation of the requisite belief. It
would be immaterial whether the Income Tax Officer at
the time of making the original assessment could or,
could not have found by further enquiry or
investigation, whether the transaction was genuine or
not, if on the basis of subsequent information, the
Income Tax Officer arrives at a conclusion, after
satisfying the twin conditions prescribed in Section
147(a) of the Act, that the assessee had not made a full
and true disclosure of the material facts at the time of
original assessment and therefore income chargeable to
tax had escaped assessment. The High Courts which
have interpreted Burlop Dealer case [(1971) 1 SCC
462 : (1971) 79 ITR 609] as laying down law to the
contrary fell in error and did not appreciate the import
of that judgment correctly.
33. The points for consideration is whether the impugned notice issued on
31.03.2021 but received on the following day on 01.04.2021 at about 7.16 a.m.
by the petitioner can be said to have been issued in accordance with Section 148
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W.P.No.6068 of 2022
of the Income Tax Act, 1961 read with Section 149 of the Income Tax Act,
1961 as it stood prior to 01.02.2021 during the period in dispute.
34. The expression used in Section 148 and 149 of the Income Tax Act,
1961 as it stood during the period in dispute is “issue” and “serve”. Thus,
Section 148 of the Income Tax Act, 1961 as it stood during the period in dispute
read with Section 149 of the Income Tax Act, 1961 contemplates the issuance
of such notice within the time limits stipulated therein. Section 148 of the
Income Tax Act, 1961 reads as under:-
“148. Issue of notice where income has escaped
assessment.—1
Before making the assessment, reassessment or
recomputation under section 147, and subject to the
provisions of Section 148A, the Assessing Officer shall serve
on the assessee a notice, along with a copy of the order
passed, if required, under Clause (d) of Section 148A,
requiring him to furnish within such period, as may be
specified in such notice, a return of his income or the income
of any other person in respect of which he is assessable under
this Act during the previous year corresponding to the
relevant assessment year, in the prescribed form and verified
in the prescribed manner and setting forth such other
particulars as may be prescribed; and the provisions of this
Act shall, so far as may be, apply accordingly as if such
return were a return to be furnished under Section 139.
35. A reading of the impugned notice dated 31.03.2021 indicates that it
has been digitally signed on 31.03.2021. It has to been thus issued in time for
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the purpose of Section 148 and 149 of the Income Tax Act, 1961 as it stood
prior to their substitution with effect from 01.04.2021. As far as the service of
notice, summons etc., is concerned, Section 282 of the Income Tax Act, 1961
deals with the same. As per Section 282 of the Income Tax Act, 1961, the
service of a notice or summons or requisition or order or any other
communication under this Act may be made by delivering or transmitting a
copy thereof, to the person therein named:-
(a)by post or by such courier services as may be approved by the Board;
or
(b)in such manner as provided under the Code of Civil Procedure, 1908
(5 of 1908) for the purposes of service of summons; or
(c)in the form of any electronic record as provided in Chapter IV of the
Information Technology Act, 2000 (21 of 2000); or
(d)by any other means of transmission of documents as provided by rules
made by the Board in this behalf.
The board may make rules providing for the addresses (including the address
for electronic mail or electronic mail message) to which the communication
referred to in sub-section (1) may be delivered or transmitted to the person
therein named.
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36. Thus, what is relevant in the issuance of notice in time. Service can
be effected on a subsequent date. This is also the view of the Hon’ble Supreme
Court in CIT Vs. Major Tikka Khushwant Singh ITR 212 ITR 650. Therefore,
the objections of the impugned notice on the ground of limitation is overrule.
As far as the contention is that the sufficient reasons have not been given to the
petitioner before issuance of the impugned notice issued under Section 148 of
the Income Tax Act, 1961 on 31.03.2021 is concerned, it is noticed that reasons
have been given on 15.11.2021 in the notice issued under Section 142(1) of the
Income Tax Act, 1961. At the stage of re-opening of the Assessment
sufficiency of the reasons for re-opening the Assessment is not relevant. All
that is required, the Assessing Officer should have reasons for re-opening
the Assessment that was earlier completed.
37. In this case, it appears that the petitioner had dealing with M/s.Nectar
Deal Trade Private Limited and which is a shell entity and had facilitated
accommodation entries for evasion of tax in the form of jamakharchi
transactions. Therefore, it is not open for the petitioner to state that no reasons
were available for re-opening the Assessment for the purpose of Section 147 of
the Act as it stood prior to 01.04.2021 for issuance of Notice under Section 148
of the Income Tax Act, 1961.
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38. The other objection of the petitioner is that the sanction of the
Principal Commissioner of Income tax was not obtained before the issuance of
impugned Notice dated 31.03.2021 also cannot be countenanced. Merely
because it is the view of the petitioner that the sanction was obtained
mechanically and that there were no proper application of mind. The reasons
communicated to the petitioner on 15.11.2021 under Section 142(1) of the Act,
notice itself indicates that there were sufficient grounds for sanctioning/approval
of issuance of Notice under Section 148 of the Income Tax Act, 1961.
Therefore, I find no merits in this Writ Petition. Therefore, this Writ Petition is
liable to be dismissed and it is accordingly dismissed.
39. This Writ Petition stands dismissed. No costs. Consequently,
connected writ miscellaneous petitions are closed.
20.2.2025
Index: Yes/No
Internet:Yes/No
Speaking Order/Non-Speaking Order
Neutral Citation: Yes/No
arb/kkd/jas
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To
1.The Deputy Commissioner of Income-tax,
Central Cir 3(4),
3rd Floor,
Investigation Building,
No.46 (Old No.108),
Mahatma Gandhi Road,
Chennai,
Tamil Nadu – 600 034.
2.Pr.CIT (Central), Chennai -1
Room No.301, New Building-III Floor,
Investigation Building,
No.46 (Old No.108),
Mahatma Gandhi Road,
Chennai,
Tamil Nadu – 600 034.
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C.SARAVANAN, J.
arb/kkd/jas
Pre-delivery Order in
W.P.No.6068 of 2022
and
W.M.P.Nos.6152 and 6153 of 2022
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.2025
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