2024 (11) TMI 277 - HC - Income Tax

Addition u/s 68 - Genuineness or creditworthiness of the unsecured loans received by the petitioner during the year not proved - HELD THAT - Petitioner has furnished all the relevant documents containing the copy of the ledger account from its audited books, confirmation of respective depositor with PAN Number, copy of its bank statements, copy of the ITR filed by the respective depositors, copy of the bank statements of respective depositors from where the funds were provided, which is evident from the paper-book filed by the petitioner in this petition as it contains the documents submitted during the assessment proceedings. It is pertinent to note that no dispute has been raised by the respondent with regard to submission of the aforesaid documents by the petitioner during the assessment proceedings. We are conscious about the settled legal position that extra-ordinary jurisdiction under Article 227 of the Constitution of India is required to be exercised sparingly and a self-restraint is required to be maintained on the entertainment of a writ challenging the orders where alternative efficacious remedy is available. However, in the gross facts of the present case, we are constrained to exercise our extra-ordinary jurisdiction as the Assessing Officer has not considered the documents placed on record and without referring to the same, has made vague observations, which are not tenable in the eyes of law and therefore, we are left with no other option but to entertain this petition in the facts of the case. This Court is of the view that the impugned assessment order has been passed without considering the documents placed on record and therefore, the same is not tenable in the eyes of law. Decided in favour of assessee.

Issues Involved:

1. Validity of the assessment order under Section 68 of the Income Tax Act.
2. Alleged violation of principles of natural justice.
3. Applicability of Section 144A in faceless assessment proceedings.
4. Exercise of extraordinary jurisdiction under Article 227 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order under Section 68 of the Income Tax Act:

The petitioner, a partnership firm engaged in the tobacco business, challenged the assessment order dated 28.09.2021, which added Rs. 2,06,92,496/- as unexplained cash credits under Section 68 of the Income Tax Act. The petitioner argued that the Assessing Officer failed to consider substantial documents provided to prove the genuineness and creditworthiness of the unsecured loans received. The court noted that the petitioner had furnished relevant documents, including ledger accounts, bank statements, and income tax returns of the depositors. The court found the Assessing Officer's observations vague and contrary to the record, as no reference was made to the documents submitted by the petitioner. Consequently, the court held that the assessment order was not tenable and required reconsideration.

2. Alleged Violation of Principles of Natural Justice:

The petitioner contended that the assessment order was passed in violation of the principles of natural justice, as the Assessing Officer ignored the documents submitted during the assessment proceedings. The court agreed, stating that the Assessing Officer made observations without analyzing the documents on record, thereby breaching natural justice principles. The court emphasized that the Assessing Officer should have considered the identity and creditworthiness of the depositors based on the documents and conducted further inquiry if unsatisfied. The court concluded that the assessment order was passed without due consideration of the evidence, warranting its quashing.

3. Applicability of Section 144A in Faceless Assessment Proceedings:

The petitioner filed an application under Section 144A seeking directions from the JCIT, which was not entertained. The respondent argued that Section 144A is not applicable to faceless assessments, as the assessment is completed by a unit comprising multiple officers. The court acknowledged the respondent's argument, supported by a notification excluding Section 144A from faceless assessments. The court accepted that the provisions of Section 144A were not applicable in the present faceless assessment regime.

4. Exercise of Extraordinary Jurisdiction under Article 227 of the Constitution of India:

The respondent argued that the petitioner had an alternative remedy by appealing to the CIT (Appeals), which was withdrawn, and thus the writ petition should not be entertained. However, the court exercised its extraordinary jurisdiction under Article 227 due to the gross facts of the case, where the Assessing Officer ignored the documents on record and made untenable observations. The court emphasized that while such jurisdiction is to be exercised sparingly, the circumstances necessitated intervention to ensure justice.

Conclusion:

The court quashed the impugned assessment order dated 28.09.2021 and remanded the matter to the Assessing Officer for reconsideration. The Assessing Officer was directed to evaluate the documents submitted during the assessment proceedings and pass a fresh assessment order within twelve weeks, considering the replies and documents in detail. The rule was made absolute to this extent, with no order as to costs.

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