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TMI Blog2023 (6) TMI 1071X X X X Extracts X X X X X X X X Extracts X X X X ..... rred to as "the Assessing Officer" for the Assessment Year 2018-19. II) quashing the order dated 19.08.2022 passed under section 148A(d) of the Act (Annexure-2) holding it to be a fit case for issuance of notice under section 148 of the Act. "I) quashing the show cause notice dated 05.07.2022 (Annexure-1) issued to the petitioner under section 148A(b) of the Income Tax Act, 1961 (hereinafter "the Act") by the respondent Assistant Commissioner of Income Tax (hereinafter referred to as "the Assessing Officer" for the Assessment Year 2018-19. II) quashing the order dated 19.08.2022 passed under section 148A(d) of the Act (Annexure-2) holding it to be a fit case for issuance of III) quashing the notice dated 22.08.2022 issued under section 148 of the Act (Annexure-3 Series) by the respondent Assessing Officer calling upon the petitioner to furnish a return of income within 30 days of service of the notice" 2. It is the petitioner's case that she had voluntarily filed her return of income for the assessment year 2018-19 in terms of Section 139(1) of the Act declaring a total income of Rs.4.12 crores on which income tax of Rs.65.64 lakhs was duly paid. In return, the dividen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of income within 30 days of the service of the said notice. The petitioner approached this Court by filing a writ petition giving rise to C.W.J.C. No. 7795 of 2022 which was disposed of by an order dated 21.06.2022 by setting aside the said impugned notice dated 31.03.2022 issued under Section 148A(b) of the Act with liberty to the authorities to issue a fresh notice within 15 days in terms of Section 148 of the Act. 4. In the light of the liberty granted by this Court by the said order dated 21.06.2022, the Assessing Officer issued a fresh notice dated 05.07.2022 under Section 148A(b) of the Act. It is the petitioner's case that the subsequent fresh notice dated 05.07.2022 was virtually a replica of the similar earlier notice dated 31.03.2022. By the said notice dated 05.07.2022, the petitioner was again asked to show cause as to why a notice under Section 148 of the Act be not issued. Again, the petitioner responded to the show cause notice by filing a reply on 19.07.2022 reiterating her request for supply of information received from the Investigation Wing together with other material/evidence relied upon in such information. The Assessing Officer, responding to the petiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... information in the form of report of the Investigation wing (DDIT, Mumbai) in the light of survey conducted in the case of M/s JM financial Assets Management limited. In this survey it was found that JM Financial had manipulated accounting methodology so as to artificially inflate the distributable surplus. The company has flouted SEBI guidelines by classifying a portion of capital as distributable surplus and artificial payout to the investor in form of dividend. Here the department is not bound to wait for the SEBI's Order in the case of JM Finance as is clearly evident with the survey findings that the company has manipulated distributable surplus. As per the facts available with the department merely chain of documents was created to show that all guidelines are followed. The company has neither followed prospective dividend distribution guidelines and has been passing hints to the distributors in advance to lure prospective clients. 9. The assesses has claimed an amount of Rs.4,04,55,592/- as exempt u/s 10(35) in his return of A.Y. 2018-2019 on an investment of Rs.10,00,00,000 in the same A.Y. in JM Financial Assets Management Limited. This dividend amount as claimed e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w cause notice came to be issued on 22.08.2022. The said order dated 19.08.2022 and the notice dated 22.08.2022 are under challenge in the present writ application. 6. The case of the petitioner to question the legality of the impugned order dated 19.08.2022 is based on the main premise that it is in violation of principles of natural justice, inasmuch as, the relevant information said to be available with the Assessing Officer was not made available to the petitioner, despite repeatedly demanded and thus, there has been violation of principles of natural justice since the petitioner did not have the adequate opportunity to object to initiation of a proceeding under Section 148 of the Act. Reliance has been placed on the Supreme Court's decision in the case of Union of India & Ors. Vs Ashish Agarwal reported in (2023) 1 SCC 617. 7. A counter affidavit has been filed on behalf of the respondents stating, inter alia, therein that an information was received from the Insight Portal which suggested that the income chargeable on tax had escaped assessment in the case of the assessee for the relevant assessment year. The information so available with the Assessing Officer was analyzed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specified authority. 9. A rejoinder has been filed on behalf of the petitioner to the counter affidavit filed on behalf of the Department. It is the petitioner's case in the rejoinder to the counter affidavit that the dividend was earned by the petitioner on the units of mutual fund purchased at prevailing Net Asset Value (NAV) in the ordinary course in a fully verifiable manner and there is not even a whisper or allegation of nexus between the said mutual fund and the petitioner. Further, the units of mutual fund had not been redeemed during the assessment year 2018-19 and hence, no capital loss had been incurred, rather these were redeemed only during the following assessment year 2019-20. It is accordingly the petitioner's case that demonstrably the capital loss had not been set off even during following assessment year 2020-21 and thus, the transaction of Rs.4,04,55,592/- cannot be termed as a sham transaction. 10. Mr. Ajay Kumar Rastogi, learned senior counsel appearing on behalf of the petitioner has placed heavy reliance on the Supreme Court's decision in the case of Ashish Agarwal (supra) and has submitted that it was incumbent upon the Assessing Officer to have given th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ication is premature which has been filed against a notice under Section 148 of the Act. She has placed heavy reliance on the observations made by the Supreme Court in paragraphs 15 and 16 in the case of Chhabil Dass Agarwal (supra). She has also placed reliance on the Supreme Court's decision in the case of GKN Driveshafts (India) Ltd. Vs. Income Tax Officer & Ors. reported in (2003) 1 SCC 72 and a Division Bench decision of Punjab and Haryana High Court dated 02.06.2022 in C.W.P. No. 9142 of 2022 (Gian Castings Pvt. Ltd. Vs. Central Board of Direct Tax & Ors.) to argue that as the proceedings have not even been completed by the statutory authority, the writ court should not interfere at such a premature stage. He has drawn our attention to Supreme Court's order dated 17.06.2022, whereby the Supreme Court declined to interfere with the decision of Punjab and Haryana High Court in the case of Gian Castings Pvt. Ltd. (supra). 12. From the pleadings on record, it appears that non-supply of statements of key persons and the list of beneficiaries referred to in the report of the Investigation Wing, which is apparently the basis for initiation of proceeding under Section 148A of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before issue of notice under section 148.-The Assessing Officer shall, before issuing any notice under section 148,- (a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a); (c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b); (d) decide, on the basis of material available on record including reply of the assessee, whether or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Wing available to the Assessing Officer in the form of "not on J.M. Balanced Fund- Annual Dividend Option beneficiaries" was provided to the petitioner well in advance on 08.08.2022. It is not the petitioner's case that the said information/report was wholly irrelevant for exercise of power under Section 147 of the Act. We reiterate that at the stage of taking decision under Section 148 of the Act, the Assessing Officer is required to form an opinion based on information available before him, other materials on record and reply of an assessee submitted under Clause (b) of Section 148A of the Act, regarding "fitness of a case" for issuance of notice under Section 148A of the Act. 17. It would have been different matter had there been no information at all or information available with the Assessing Officer were though irrelevant, still the Assessing Officer reached a conclusion that it was a fit case for issuance of notice under Section 148 of the Act. 18. We find force in the submissions made on behalf of the Income Tax Department that the points which the petitioner is raising can be raised in response to the notice issued under Section 148 of the Act. It is not a case where the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions 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 required to be furnished under section 139: Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice." 21. On comparative examination of Sections 148 and 148A of the Act, it can be easily culled out that Section 148A lays down the requisite co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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