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TMI Blog2023 (6) TMI 1071X X X X Extracts X X X X X X X X Extracts X X X X ..... s was provided to the petitioner well in advance on 08.08.2022. It is not the petitioner s case that the said information/report was wholly irrelevant for exercise of power u/s 147 of the Act. We reiterate that at the stage of taking decision under Section 148 AO is required to form an opinion based on information available before him, other materials on record and reply of an assessee submitted under Clause (b) of Section 148A of the Act, regarding fitness of a case for issuance of notice under Section 148A. It would have been different matter had there been no information at all or information available with the Assessing Officer were though irrelevant, still the Assessing Officer reached a conclusion that it was a fit case for issuance of notice under Section 148 of the Act. We, accordingly, do not find it a fit case for interference in exercise of writ jurisdiction under Article 226 of the Constitution of India. In any event, the petitioner is at liberty to raise all the aspects which are being raised in the present writ application before proceeding, consequent upon issuance of notice under Section 148 of the Act. Whether there was no prior approval of the specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 148A(b) of the Income Tax Act, 1961 (hereinafter the Act ) by the respondent Assistant Commissioner of Income Tax (hereinafter referred to as the Assessing Officer for the Assessment Year 2018-19. II) quashing the order dated 19.08.2022 passed under section 148A(d) of the Act (Annexure-2) holding it to be a fit case for issuance of III) quashing the notice dated 22.08.2022 issued under section 148 of the Act (Annexure-3 Series) by the respondent Assessing Officer calling upon the petitioner to furnish a return of income within 30 days of service of the notice 2. It is the petitioner s case that she had voluntarily filed her return of income for the assessment year 2018-19 in terms of Section 139(1) of the Act declaring a total income of ₹4.12 crores on which income tax of ₹65.64 lakhs was duly paid. In return, the dividend income of ₹4.04 crores received during the year from a mutual fund, namely, JM Equity Hybrid Fund-Regular-Annual IDCW Option, was duly claimed as exempt under Section 10(35) of the Act. The return was duly processed under Section 143(1) of the Act in terms of the intimation dated 02.02.2019 and no further demand by way of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liberty to the authorities to issue a fresh notice within 15 days in terms of Section 148 of the Act. 4. In the light of the liberty granted by this Court by the said order dated 21.06.2022, the Assessing Officer issued a fresh notice dated 05.07.2022 under Section 148A(b) of the Act. It is the petitioner s case that the subsequent fresh notice dated 05.07.2022 was virtually a replica of the similar earlier notice dated 31.03.2022. By the said notice dated 05.07.2022, the petitioner was again asked to show cause as to why a notice under Section 148 of the Act be not issued. Again, the petitioner responded to the show cause notice by filing a reply on 19.07.2022 reiterating her request for supply of information received from the Investigation Wing together with other material/evidence relied upon in such information. The Assessing Officer, responding to the petitioner s request, supplied copies of the information/report from DDI, Mumbai and the information from Insight Portal, through communication dated 10.08.2022. The petitioner again raised an objection through letter dated 10.08.2022 asserting that the key persons as well as the list of beneficiaries referred to in the report ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y has flouted SEBI guidelines by classifying a portion of capital as distributable surplus and artificial payout to the investor in form of dividend. Here the department is not bound to wait for the SEBI's Order in the case of JM Finance as is clearly evident with the survey findings that the company has manipulated distributable surplus. As per the facts available with the department merely chain of documents was created to show that all guidelines are followed. The company has neither followed prospective dividend distribution guidelines and has been passing hints to the distributors in advance to lure prospective clients. 9. The assesses has claimed an amount of Rs.4,04,55,592/- as exempt u/s 10(35) in his return of A.Y. 2018-2019 on an investment of Rs.10,00,00,000 in the same A.Y. in JM Financial Assets Management Limited. This dividend amount as claimed exempt by the assesse is in question here as the same is just a sham transaction. As explained in the above para the company has inflated distributable surplus to give these dividends. But as stated by the assesse in his reply dated 16.08.2022, that if the company has no distributable surplus he is getting back his o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of principles of natural justice, inasmuch as, the relevant information said to be available with the Assessing Officer was not made available to the petitioner, despite repeatedly demanded and thus, there has been violation of principles of natural justice since the petitioner did not have the adequate opportunity to object to initiation of a proceeding under Section 148 of the Act. Reliance has been placed on the Supreme Court s decision in the case of Union of India Ors. Vs Ashish Agarwal reported in (2023) 1 SCC 617. 7. A counter affidavit has been filed on behalf of the respondents stating, inter alia, therein that an information was received from the Insight Portal which suggested that the income chargeable on tax had escaped assessment in the case of the assessee for the relevant assessment year. The information so available with the Assessing Officer was analyzed and found that the assessee had received dividend from J.M. Equity Hybrid Fund amounting to ₹4,04,55,592/-. Dealing with the petitioner s assertion of non-supply of the information relied upon by the Assessing Officer, it has been stated that the earlier notice was set aside by this Court on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailing Net Asset Value (NAV) in the ordinary course in a fully verifiable manner and there is not even a whisper or allegation of nexus between the said mutual fund and the petitioner. Further, the units of mutual fund had not been redeemed during the assessment year 2018-19 and hence, no capital loss had been incurred, rather these were redeemed only during the following assessment year 2019-20. It is accordingly the petitioner s case that demonstrably the capital loss had not been set off even during following assessment year 2020-21 and thus, the transaction of ₹4,04,55,592/- cannot be termed as a sham transaction. 10. Mr. Ajay Kumar Rastogi, learned senior counsel appearing on behalf of the petitioner has placed heavy reliance on the Supreme Court s decision in the case of Ashish Agarwal (supra) and has submitted that it was incumbent upon the Assessing Officer to have given the petitioner a due opportunity of hearing before issuance of a notice under Section 148A(b) of the Act. He has submitted that it is the evident from the counter affidavit itself that the assessing officer was not knowing the complete statements of key persons named in the information/report of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of GKN Driveshafts (India) Ltd. Vs. Income Tax Officer Ors. reported in (2003) 1 SCC 72 and a Division Bench decision of Punjab and Haryana High Court dated 02.06.2022 in C.W.P. No. 9142 of 2022 (Gian Castings Pvt. Ltd. Vs. Central Board of Direct Tax Ors.) to argue that as the proceedings have not even been completed by the statutory authority, the writ court should not interfere at such a premature stage. He has drawn our attention to Supreme Court s order dated 17.06.2022, whereby the Supreme Court declined to interfere with the decision of Punjab and Haryana High Court in the case of Gian Castings Pvt. Ltd. (supra). 12. From the pleadings on record, it appears that non-supply of statements of key persons and the list of beneficiaries referred to in the report of the Investigation Wing, which is apparently the basis for initiation of proceeding under Section 148A of the Act, is one of the primordial issue in the present writ application. Whereas, it is the petitioner s case that because of non-supply of such statement, she could not effectively submit her reply and was thus deprived of the opportunity of being heard as contemplated under Section 148A(b) of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax has escaped assessment; (b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a); (c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b); (d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or exercise of power under Section 147 of the Act. We reiterate that at the stage of taking decision under Section 148 of the Act, the Assessing Officer is required to form an opinion based on information available before him, other materials on record and reply of an assessee submitted under Clause (b) of Section 148A of the Act, regarding fitness of a case for issuance of notice under Section 148A of the Act. 17. It would have been different matter had there been no information at all or information available with the Assessing Officer were though irrelevant, still the Assessing Officer reached a conclusion that it was a fit case for issuance of notice under Section 148 of the Act. 18. We find force in the submissions made on behalf of the Income Tax Department that the points which the petitioner is raising can be raised in response to the notice issued under Section 148 of the Act. It is not a case where the impugned order suffers from the vice of total non-application of mind or violation of principles of natural justice. The decisions in the case of Maharaja Edifice Pvt. Ltd. Vs. Union of India Ors. reported in [(2022) 446 ITR 508 (Cal)] and that of Delhi High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant assessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice. 21. On comparative examination of Sections 148 and 148A of the Act, it can be easily culled out that Section 148A lays down the requisite conditions before issuance of a notice under Section 148 of the Act. The proviso to Section 148 restricts the Assessing Officer from issuance of a notice without prior approval of the specified authority. Section 148A lays down a procedure as a condition pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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