2022 (10) TMI 236 - HC - Income Tax

Reopening of assessment u/s 147 - allegation of accommodation entries and the assessee as a beneficiary - HELD THAT - We have perused reply filed by the petitioner in response to the SCN - In the said reply, the assessee had not adverted to its replies - The reason for not adverting to its earlier replies is curious, considering this allegation was specifically recorded by AO in the SCN. The said reply dated 3rd June, 2022, also does not deal with the merits of the allegations contained in the statutory SCN as regards the nature of transactions between assessee and the third party. In its reply the assessee admitted that it had carried out a single transaction of Rs.1,50,00,000/- with M/s Surya Trading Company in the relevant year and clarified that it had no transaction with the entity M/s Mahamaya Trading Company. In the reply furnished on 16 th April, 2021, the assessee annexed its ledger and bank statement which reflects a single transaction with M/s Surya Trading Company during the FY 2012-13. The assessee has not furnished any explanation in the said reply with respect to the purpose of the transaction with the said entity, though, the Department, in its notice dated 13th April, 2021, issued under Section 133(6) of the Act had specifically called upon the assessee to furnish the purpose of the transaction. No documents were filed with the said reply to evidence that the said transaction was carried out in ordinary course of business. Revenue s contention that assessee is a beneficiary of an accommodation entry from M/s Surya Trading Company and the assessee s contention that it was done in course of business are rival pleas and its determination is a pure question of fact, which will have to be determined by the statutory authorities after appreciation of evidence. A writ petition cannot be maintained to determine the disputed facts and therefore this petition is not maintainable at this interim stage of reassessment proceedings. Supreme Court in Commissioner of Income Tax and Ors. v. Chhabil Das Agarwal 2013 (8) TMI 458 - SUPREME COURT has held that as the Act of 1961 provides a complete machinery for assessment/reassessment of tax, the assessee is not permitted to abandon that machinery and invoke writ jurisdiction of High Court under Article 226. The present case does not fall under the exceptional grounds on which a writ jurisdiction of the Court can be invoked. The present writ petition and pending applications are dismissed.

Summary

Issues: Challenge to order under Section 148A(d) of the Income Tax Act, 1961 and notice issued under Section 148 for the Assessment Year 2013-14.

Analysis:
1. The petitioner challenged the order dated 26th July, 2022, passed under Section 148A(d) and the notice issued under Section 148 for the Assessment Year 2013-14. The Show Cause Notice dated 20th May, 2022, highlighted the petitioner's involvement in High Value Transactions with certain entities engaged in providing accommodation entries. The petitioner raised legal objections in its reply dated 3rd June, 2022, primarily focusing on procedural compliance, applicability of Section 149, and the proviso to Section 149(1) of the Act.

2. The Assessing Officer (AO) observed that the petitioner failed to respond to the merits of the allegations in the Show Cause Notice. The AO considered the initial notice issued on 22nd April, 2021, and concluded that the income had escaped assessment, leading to the initiation of reassessment proceedings. The petitioner contended that its replies dated 16th April, 2021, and 24th July, 2021, were not considered by the AO, seeking to set aside the impugned order and notice.

3. The High Court noted discrepancies in the petitioner's responses, highlighting that the petitioner did not address the merits of the allegations in the statutory Show Cause Notice. The petitioner's admission of a transaction with one entity but lack of explanation regarding the purpose of the transaction raised concerns. The Revenue contended that the petitioner benefited from an accommodation entry, while the petitioner claimed the transaction was part of its business activities. The Court emphasized that such factual disputes are to be resolved by statutory authorities, making the writ petition premature.

4. Referring to precedents, the Court emphasized that the Income Tax Act provides a comprehensive mechanism for assessment/reassessment, discouraging the abandonment of such machinery in favor of writ jurisdiction. Consequently, the Court dismissed the writ petition but directed the AO to decide the matter independently, unaffected by the Court's observations.

In conclusion, the High Court dismissed the writ petition challenging the order under Section 148A(d) and the notice under Section 148 for the Assessment Year 2013-14, emphasizing the need for statutory authorities to resolve factual disputes and discouraging premature intervention through writ jurisdiction.