2024 (8) TMI 431 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - statutory scheme of the Procedure for Assessment under Chapter XIV of the IT Act - requirement of having reasons to believe - 13 plots sold during the assessment year the considerations for which are said to have been received in cash. HELD THAT - Explanations (1) (2) to section 148 of the IT Act explain the expression information on the basis of which the Assessing Officer can proceed under section 148A. In Union of India Ors. Vs. Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT the Hon ble Supreme Court held that the Assessing Officer is required to provide all information and materials to the assessee on which the Revenue seeks to place reliance so as to enable the assessee to effectively make its defence to the notice under section 148A(b) of the Income Tax Act. We find that the inquiry report was uploaded on VRU functionality on Insight portal and, as noticed above, a copy thereof was enclosed with the notice dated 28th March 2024. We are of the opinion that a detailed adjudication on the merits of the information available with the AO and defence set up by the assessee is not contemplated at the stage of passing an order u/s 148A (d). It is true that the AO is required to pass an order which should contain a brief narration of facts and the defence set up by the assessee, but then, a conclusive finding as regards the defence taken by the assessee by the AO is not required at this stage as the same may prejudice the further proceedings. Determination made by the Assessing Authority u/s 147 is otherwise subject to appeal under section 246A of the Income Tax Act and therefore the merits of the information referable to section 148A remains subject to the assessment proceedings initiated under section 148. Petitioner-company in its reply set up a defence that it has no knowledge about sale of 13 plots by Mr. Kamlesh Kumar Deora who was given a power of attorney on 7th June 2019 by Mrs. Manju Agarwal - The law relating to the power of attorney is governed by the provisions of the Powers of Attorney Act, 1882 and it is well-settled that an agent acting under the power of attorney always acts in the name of his principal and any document executed or thing done by an agent on the basis of power of attorney is as effective as if executed or done by the principal himself. It is well-known that a power of attorney is a document of convenience and except in cases where a power of attorney is coupled with interest, it is revocable. No doubt the power of attorney holder acts in a fiduciary capacity but any act of infidelity or breach of trust shall necessarily be a matter between the donor and the donee. In that event, the remedy of the petitioner-company shall lie elsewhere and not before the writ Court by raising such a technical plea. The jurisdiction conferred on the High Court under Article 226 is no doubt very wide but it is an accepted principle that the High Court exercises its jurisdiction under Article 226 of the Constitution of India for a public law remedy and it is available against a body or person performing public law function. The stand taken by the petitioner-company that it had no knowledge about the sale transaction by the power of attorney holder is not a ground for the Revenue not to proceed against it . The petitioner-company shall be bound by the doctrine of agency and whatever act the power of attorney has done on his behalf by virtue of the power of attorney dated 07th June 2019 shall bind the petitioner-company. This is another issue to say that the power of attorney holder acted beyond the power authorized to him and, then in that case, the dispute shall be between the petitioner-company and the power of attorney holder. WP dismissed.

Issues Involved:
1. Opportunity of hearing to the petitioner-company.
2. Consideration of the reply furnished by the petitioner-company.
3. Validity of the assessment proceedings under Section 148A of the Income Tax Act, 1961.
4. Legal implications of actions taken by the power of attorney holder.

Issue-wise Detailed Analysis:

1. Opportunity of Hearing to the Petitioner-Company:
The petitioner-company argued that no opportunity of hearing was provided before the reassessment notice was issued. The Court clarified that under Section 148A(b) of the Income Tax Act, the requirement is to provide an opportunity of being heard through a show cause notice, not necessarily a personal hearing. The petitioner-company had indeed submitted a reply to the show cause notice, which was considered in the order dated 5th April 2024. The Court referenced the decision in "Competition Commission of India Vs. Steel Authority of India Ltd. & Anr." to emphasize that the principle of natural justice does not always require a personal hearing and must be applied in context.

2. Consideration of the Reply Furnished by the Petitioner-Company:
The petitioner-company contended that its reply was not considered. The Court found that the reply was perused and considered by the Assessing Officer (ACIT) in the order dated 5th April 2024. The Court noted that a detailed adjudication on the merits of the information available with the Assessing Officer and the defence set up by the assessee is not required at the stage of passing an order under Section 148A(d). The Court cited "GKN Driveshafts (India) Ltd. vs. Income Tax Officer & Ors." to support this view and emphasized that the merits of the information are subject to the assessment proceedings initiated under Section 148.

3. Validity of the Assessment Proceedings under Section 148A:
The Court examined the statutory scheme under Chapter XIV of the Income Tax Act, 1961, particularly Sections 147, 148, and 148A. It noted that the Assessing Officer is required to conduct an inquiry, provide an opportunity of being heard, consider the reply, and then decide whether to issue a notice under Section 148. The Court found that these procedural requirements were met in this case. The Court also referenced the decision in "Union of India & Ors. Vs. Ashish Agarwal" to highlight that the Assessing Officer must provide all information and materials to the assessee to enable an effective defence. The Court concluded that the procedural requirements under Section 148A were satisfied, and the assessment proceedings were valid.

4. Legal Implications of Actions Taken by the Power of Attorney Holder:
The petitioner-company argued that it had no knowledge of the sale of plots by the power of attorney holder, Mr. Kamlesh Kumar Deora. The Court explained that under the Powers of Attorney Act, 1882, an agent acting under a power of attorney acts in the name of the principal, and any document executed by the agent is as effective as if done by the principal. The Court referenced "State of Rajasthan & Ors. Vs. Basant Nahata" and "Suraj Lamp and Industries Pvt. Ltd. Vs. State of Haryana" to support this view. The Court held that the petitioner-company is bound by the actions of the power of attorney holder and any dispute between the petitioner-company and the power of attorney holder is a separate issue. The Court concluded that the stand taken by the petitioner-company does not prevent the Revenue from proceeding against it.

Conclusion:
The Court dismissed the petition, finding no merit in the arguments presented by the petitioner-company. The assessment proceedings under Section 148A were upheld as valid, and the petitioner-company was held accountable for the actions of its power of attorney holder. The decision emphasized the procedural compliance by the Revenue and the binding nature of actions taken by an agent under a power of attorney.

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