2024 (12) TMI 261 - HC - Income Tax

Reopening of assessment u/s 147 - Violation of the provisions of Section 148A - Petitioners herein were not provided an opportunity of being heard in the manner specified in the order - HELD THAT - From a perusal of the impugned orders, it would be seen that in the impugned orders, the Respondent No.3 had categorically mentioned that Shri Ashok Kumar Gupta had made non-genuine accommodation entries of purchase and sale to various individuals and entities. These accommodation entries were made through various firms which were controlled by Shri Ashok Kumar Gupta. Amongst these firms, it included the firms namely M/s Kalki Trading Company which was owned by the servant of Shri Ashok Kumar Gupta and M/s Swastik Traders which was owned by the nephew of Shri Ashok Kumar Gupta. From the replies so submitted by both X and Y to the Show Cause notices would show that both X and Y admitted transactions with these firms. It showed that commodities i.e. Rajma and Kabuli Chana on the same day was purchased by the firms belonging to X and Y from a firm namly M/s NCS Enterprise at Nagaland and on the same date, that commodities were sold to these firms namely M/s Swastik Traders and M/s Kalki Trading Company at Delhi. The said aspect shows that there were transactions on papers and the Respondent No.3 therefore have proper reasons to believe that these were only paper transactions which was also admitted by Shri Ashok Kumar Gupta on oath during the survey proceedings. In the opinion of this Court, the impugned orders assailed under Section 148A(d) of the Act of 1961 in both the writ petitions cannot be said to be in violation of Section 148A of the Act of 1961. Further to that, from the impugned orders, it is also seen that the transactions in question being bogus transactions, the efficacy of the contentions made by the Petitioners that the transactions were of sale and not purchase had lost its effect. No violation to Section 148A while passing the impugned orders and as such the said impugned orders do not come within the ambit of the exceptions as settled by the Supreme Court in Godrej Sara Lee Vs. Excise and Taxation Officer cum Assessing Authority and Others 2023 (2) TMI 64 - SUPREME COURT .

Summary

Issues Involved:

1. Whether the impugned orders passed under Section 148A(d) are in violation of the provisions of Section 148A of the Income Tax Act, 1961.
2. Whether any interference is required in the facts and circumstances of the case under Article 226 of the Constitution of India.

Issue-wise Detailed Analysis:

1. Violation of Section 148A Provisions:

The Petitioners challenged the orders issued under Section 148A(d) of the Income Tax Act, 1961, arguing that the mandate of Section 148A was not complied with. The core of the dispute was whether the Respondent No.3 exercised jurisdiction in accordance with the provisions of Section 148A. The Petitioners claimed that they were not provided an opportunity of being heard as specified in a prior court order. They contended that the Show Cause notices alleged bogus transactions of sales, whereas they had demonstrated that the transactions were sales, not purchases. However, the court found these submissions misconceived, as the Petitioners had admitted to transactions with the firms in question, albeit as sales. The court observed that the Respondent No.3 had valid reasons to believe the transactions were non-genuine, supported by statements from a key individual involved in providing bogus entries. Thus, the orders under Section 148A(d) were not in violation of Section 148A, as the procedural requirements were met.

2. Necessity for Interference Under Article 226:

The court examined whether the case warranted interference under Article 226 of the Constitution, given the availability of an alternative remedy. It considered established legal principles that discourage writ petitions when an effective remedy exists, especially in tax matters. The court noted that the Petitioners could challenge any fresh assessment orders in appellate proceedings. The court emphasized that the transactions in question were part of a larger network of bogus transactions, as detailed in the impugned orders. The court concluded that the circumstances did not meet the exceptions for exercising jurisdiction under Article 226, as outlined by the Supreme Court. Consequently, the court dismissed both writ petitions, finding no grounds for interference.

In conclusion, the court upheld the orders under Section 148A(d) and dismissed the writ petitions, emphasizing adherence to procedural requirements and the availability of alternative remedies. The interim orders previously granted were vacated.