2024 (11) TMI 1032 - HC - Income Tax

Reopening of assessment u/s 147 - Income chargeable u/s 5(2) - assessment funds transferred from the NRE account of the petitioner's husband to the petitioner's domestic bank account - HELD THAT - The question as to whether the petitioner's husband was a non resident Indian was found as not having been established by the petitioner with documentary evidence. Similarly with regard to the amount it is found that the petitioner failed to prove the genuineness of the sources with material evidence. All these are essential questions of fact which are disputed. It is trite law that this Court under Article 226 of the Constitution, would be loathe in interfering with the orders of assessment when there is an effective alternative remedy available, more so, when there is a need to examine disputed questions of facts, for examination of disputed question of facts is normally alien to jurisdiction under Article 226 of the Constitution. This Writ Petition challenging the impugned order is rejected. The petitioner is at liberty to file an appeal, if any appeal is filed within a period of 3 weeks from the date of receipt of copy of this order, the same shall be entertained without reference to limitation, subject to complying with other conditions relating to appeal including pre-deposit if any. It is made clear that have not examined the merits and the observation is only for the limited purpose of examining whether the writ petition ought to be entertained or otherwise.

Summary

Issues Involved:

1. Jurisdictional challenge regarding assessment of funds transferred from NRE account.
2. Validity of service of notice under Section 148-A(b) of the Income Tax Act.
3. Limitation period for initiating proceedings under Section 149 of the Act.
4. Legality of tax levied under Section 69-A in relation to Sections 5 and 6 of the Act.
5. Alleged non-consideration of submissions and violation of principles of natural justice.
6. Availability of an effective alternative remedy.

Detailed Analysis:

1. Jurisdictional Challenge:

The petitioner contested the jurisdiction of the assessment order, arguing that the funds transferred from her husband's NRE account to her domestic account were not chargeable to tax under Sections 5 and 6 of the Income Tax Act. The court noted the petitioner's failure to substantiate her claim that her husband was an NRI with adequate documentary evidence. Consequently, the amount of Rs. 37,00,000/- was treated as unexplained income in the hands of the petitioner.

2. Validity of Service of Notice:

The petitioner argued that the notice under Section 148-A(b) was not properly served, as it was sent to an outdated address. The court observed that the petitioner received the notice through a relative after the order under Section 148-A(d) had already been passed. Despite the petitioner's subsequent submission of a return and detailed reply, the court found no merit in the argument that improper service vitiated the proceedings.

3. Limitation Period:

The petitioner claimed that the proceedings were barred by limitation under Section 149 of the Act. However, the court did not find sufficient grounds to uphold this claim, as the petitioner was unable to demonstrate how the limitation period was exceeded.

4. Legality of Tax under Section 69-A:

The petitioner contended that the impugned order inappropriately levied tax under Section 69-A on sums not taxable under Section 5. The court found that the petitioner failed to prove the sources of credits amounting to Rs. 64,18,126/- in her bank account, which were treated as unexplained income. Similarly, the repayment of a housing loan principal amounting to Rs. 33,96,647/- was also treated as unexplained, since the petitioner did not provide evidence of the sources.

5. Non-Consideration of Submissions:

The petitioner alleged that her submissions and documents were not considered, constituting a violation of natural justice principles. The court noted that the petitioner was given opportunities to present her case, including a video conference, but failed to provide necessary evidence. Therefore, the court did not find a violation of natural justice.

6. Availability of Alternative Remedy:

The respondent argued that the writ petition should not be entertained due to the availability of an effective alternative remedy. The court agreed, emphasizing that disputed questions of fact are not typically addressed under Article 226 of the Constitution. Consequently, the court rejected the writ petition, advising the petitioner to file an appeal within three weeks, which would be entertained without reference to limitation, subject to other conditions.

Conclusion:

The writ petition was dismissed, with the court directing the petitioner to pursue an appeal. The court made it clear that it had not examined the merits of the case, and the appellate authority should dispose of any appeal uninfluenced by the observations made in this judgment.