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TMI Blog2023 (8) TMI 1027X X X X Extracts X X X X X X X X Extracts X X X X ..... rrived at after deducting the permissible deductions under IT Act from income . As such quantum of income is invariably more than the income chargeable to tax. More so, all penal provisions under the scheme of income tax, emanate from the factum of evasion of tax calculated based on income chargeable to tax. Several High Courts have held that income chargeable to tax cannot be the gross receipts/consideration in any business transaction. The objection of learned counsel for Revenue that the petitioner having failed to file return for the relevant assessment year cannot seek to challenge the impugned order, is heard to be dismissed. The provisions from Section 147 to Section 151 pertaining to subject of income escaping assessment in the IT Act do not support the contention of the Revenue. There is nothing in Section 148, 148 A or Section 149 which may prevent assessee from taking advantage of said provisions merely because of his failure to file return. Neither the notice under Section 148A(b) nor order u/s 148 A(d), nor the consequential notice under section 148A give any indication that amount alleged to be income escaping assessment, includes land/buildings/shares/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment/re-assessment/re- computation of income which has escaped assessment qua Assessment year 2016-2017. Further challenge is laid to the consequential notice issued under Section 148 vide Annexure P-5. 2. Shri H.S. Chhabra, learned counsel for petitioner and Shri Siddharth Sharma, learned counsel for the respondents are heard on the question of admission so also final disposal. 3. The grounds raised by learned counsel for petitioner in support of challenge to the impugned order and notice are as follows: (a) The income referred to in impugned order and notice Annexure P-3 and P-4 is not income chargeable to tax but is the gross proceeds/consideration received by petitioner for sale of 16 scooters during the assessment year 2016-2017 and thus the Revenue has no authority to invoke Section 148A or issue notice under Section 148. (b). The proceedings for reopening assessment of income having escaped assessment are beyond jurisdiction of the Revenue since it is barred under Section 149. 3.1. Learned counsel for the petitioner in support of the aforesaid challenge and the grounds raised has relied upon Division Bench decision of Gujarat High Court rendered on 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... poses of this sub-clause, trust includes any other legal obligation;] (iii) the value of any perquisite or profit in lieu of salary taxable under clauses (2) and (3) of section 17; [(iiia) any special allowance or benefit, other than perquisite included under sub-clause (iii), specifically granted to the assessee to meet expenses wholly, necessarily and exclusively for the performance of the duties of an office or employment of profit; (iiib) any allowance granted to the assessee either to meet his personal expenses at the place where the duties of his office or employment of profit are ordinarily performed by him or at a place where he ordinarily resides or to compensate him for the increased cost of living;] (iv) the value of any benefit or perquisite, whether convertible into money or not, obtained from a company either by a director or by a person who has a substantial interest in the company, or by a relative of the director or such person, and any sum paid by any such company in respect of any obligation which, but for such payment, would have been payable by the director or other person aforesaid; [(iva) the value of any benefit or perquisite, whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fund for the welfare of such employees;] [(xi) any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy. Explanation. For the purposes of this clause, the expression Keyman insurance policy shall have the meaning assigned to it in the Explanation to clause (10D) of section 10;] [(xii) any sum referred to in [clause (va) of section 28;] [(xiia) the fair market value of inventory referred to in clause (via) of section 28;] [(xiii) any sum referred to in clause (v) of sub-section (2) of section 56;] [(xiv) any sum referred to in clause (vi) of sub-section (2) of section 56;] [(xv) any sum of money or value of property referred to in clause (vii) [or clause (viia)] of sub-section (2) of section 56;] [(xvi) any consideration received for issue of shares as exceeds the fair market value of the shares referred to in clause (viib) of sub-section (2) of section 56;] [(xvii) any sum of money referred to in clause (ix) of sub-section (2) of section 56;] [(xviia) any sum of money or value of property referred to in clause (x) of sub-section (2) section 56;] [(xviib) any compensation or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any corporation owned or controlled by the Government, under any law for the time being in force, of the management of any property or business;] [(e) any person, by whatever name called, at or in connection with the termination or the modification of the terms and conditions, of any contract relating to his business;] (iii) income derived by a trade, professional or similar association from specific services performed for its members; [(iiia) profits on sale of a licence granted under the Imports (Control) Order, 1955, made under the Imports and Exports (Control) Act, 1947 (18 of 1947);] [(iiib) cash assistance (by whatever name called) received or receivable by any person against exports under any scheme of the Government of India;] [(iiic) any duty of customs or excise re-paid or re-payable as drawback to any person against exports under the Customs and Central Excise Duties Drawback Rules, 1971;] [(iiid) any profit on the transfer of the Duty Entitlement Pass Book Scheme, being the Duty Remission Scheme under the export and import policy formulated and announced under section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with business of any industrial or commercial nature such as accounting, banking, communication, conveying of news or information, advertising, entertainment, amusement, education, financing, insurance, chit funds, real estate, construction, transport, storage, processing, supply of electrical or other energy, boarding and lodging;] [(vi) any sum received under a Keyman insurance policy including the sum allocated by way of bonus on such policy. [(via) the fair market value of inventory as on the date on which it is converted into, or treated as, a capital asset determined in the prescribed manner;] Explanation. For the purposes of this clause, the expression Keyman insurance policy shall have the meaning assigned to it in clause (10D) of section 10;] [(vii) any sum, whether received or receivable, in cash or kind, on account of any capital asset (other than land or goodwill or financial instrument) being demolished, destroyed, discarded or transferred, if the whole of the expenditure on such capital asset has been allowed as a deduction under section 35AD.] * * * * * Explanation 2. Where speculative transactions carried on by an assessee are of such a n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the foregoing provisions of this section, an eligible assessee to whom the provisions of sub-section (4) are applicable and whose total income exceeds the maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish a report of such audit as required under section 44AB.] [(6) The provisions of this section, notwithstanding anything contained in the foregoing provisions, shall not apply to (i) a person carrying on profession as referred to in sub-section (1) of section 44AA; (ii) a person earning income in the nature of commission or brokerage; or (iii) a person carrying on any agency business.] Explanation. For the purposes of this section, (a) eligible assessee means, (i) an individual, Hindu undivided family or a partnership firm, who is a resident, but not a limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of the Limited Liability Partnership Act, 2008 (6 of 2009); and (ii) who has not claimed deduction under any of the sections ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [(ii) any audit objection to the effect that the assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of this Act; or (iii) any information received under an agreement referred to in section 90 or section 90A of the Act; or (iv) any information made available to the Assessing Officer under the scheme notified under section 135A; or (v) any information which requires action in consequence of the order of a Tribunal or a Court.] Explanation 2. For the purposes of this section, where, (i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or (ii) a survey is conducted under section 133A, other than under sub- section (2A) 20 [***] of that section, on or after the 1st day of April, 2021, in the case of the assessee; or (iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires: Provided that the provisions of this section shall not apply in a case where, (a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or (b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for which the last of authorisations is executed; or (c) requisition is made under Section 132-A, after the 15 day of March of any financial year and the period for issue of notice under Section 148 expires on the 31 day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under Section 148 in such case shall be deemed to have been issued on the 31 day of March of such financial year: Provided also that where the information as referred to in Explanation 1 to Section 148 emanates from a statement recorded or documents impounded under Section 131 or Section 133-A, as the case may be, on or before the 31 day of March of a financial year, in consequence of, (a) a search under Section 132 which is initiated; or (b) a search under Section 132 for which the last of authorisations is executed; or (c) a requisition made under Section 132-A, after the 15 day of March of such financial year, a period of fifteen days shall be excluded for the purpose of computing the period of limitation as per this section and the notice issued under claus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income chargeable to tax are at variance to each other. The expression income is inclusively defined under Section 2(24) of IT Act whereas income chargeable to tax obviously denotes an amount which is less than income . The income chargeable to tax is arrived at after deducting the permissible deductions under IT Act from income . As such quantum of income is invariably more than the income chargeable to tax. 6.2 More so, all penal provisions under the scheme of income tax, emanate from the factum of evasion of tax calculated based on income chargeable to tax. 6.3 Several High Courts have held that income chargeable to tax cannot be the gross receipts/consideration in any business transaction. One such decision which appears to be closest to the facts of present case is the Single Bench decision of Karnataka High Court rendered on 24.5.2023 in W.P.No.7647/2023 (T-IT) (Mr. Sanath Kumar Murali Vs. The Income Tax Officer Ors.), the relevant extract of which is reproduced as follows: 18. Accordingly, in the present case, the words found in Section 149 which is 'income chargeable to tax' must be read in terms of 'income' as arising out of the &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be income escaping assessment, includes land/buildings/shares/equities/ loans/ advances etc. as contended by the Revenue. 6.6 In fact when petitioner/assessee filed a reply to the notice under Section 148(A)(b) of the IT Act vide Annexure P-2, it was clearly revealed that the said amount of Rs.7205084/- is the gross receipt of sale consideration of 16 scooters. Meaning thereby that the said amount of Rs.7205084/- was the total sale consideration receipt of the transaction in question, and not income chargeable to tax which would obviously be less than the said amount. 6.7 Along with reply vide Annexure P-2, the details of items sold and payment receipt, computation of total income and the computation of tax on total income was worked out and submitted to the Revenue. 6.8 It appears that while considering the said reply and before passing the impugned order under Section 148A(b) of the IT Act, highly casual and perfunctory approach was adopted, turning a Nelson s eye towards the palpable and elementary aspect of clear distinction between consideration of sale and income chargeable to tax. 7. In a recent decision rendered by this Bench where a view in favour of Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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