TaxTMI 
TaxTMI 
2022 (8) TMI 806
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....ssessment of Income for A.Y. 2017-18. II. To issue a writ, order or direction in the nature of Certiorari Quashing the Re-Assessment Order for the Assessment Year 2017-18, Dt. 31.03.2022 [Annexure No.13] which is made in gross violation of law and principles of Natural justice. III. To issue a writ, order or direction in the nature of MANDAMUS declaring that Amendment caused to the Income Tax Act, 1961, vide Section 42 of the Finance Act, 2022, OMITTING Sub-Section 9 of Section 144B of the Income Tax Act, is wholly unconstitutional and bad in law. IV. To issue a writ, order or direction in the nature of CERTIORARI quashing the Order Dt. 30.03.2021 issued under Section 151 of the Income Tax Act, by Respondent No.3 [Annexure No.2 (coll)] and the connected proceedings for Reassessment of Income for A.Y. 2017-18." 3. By order dated 26.05.2022, the relief No.III has been deleted on the statement made by the petitioner's counsel that the Relief No.III is not being pressed. 4. This writ petition was heard at length on 18.05.2022, 26.05.2022, 30.05.2022, 05.07.2022, 14.07.2022 and 05.08.2022 and the judgment was reserved on 05.08.2022. Submissions on....
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.... respondent no.1 and submits that the averments made therein show complete collapse of the system in the Income Tax Department. The deponent of the counter affidavit dated 24.07.2022 filed on behalf of Union of Indiarespondent no.1 is the Principal Chief Commissioner and he does even know basic principles of assessment and quasi judicial function of the assessing officer. If the averments made in paragraph Nos. 6,7,8,9, and 10 of the counter affidavit filed on behalf of the respondent no.1 are accepted, then entire assessment process would be an empty formality. From the state of affairs as are prevailing presently as reflected from the paragraph Nos. 6,7,8,9, and 10 of the counter affidavit filed on behalf of the respondent no.1, it is evident that even basic principles of Rule of law have been given complete goby and assessing officer are under threat of the top level or higher authorities that if they want to do justice or want to discharge quasi judicial function, they may face disciplinary action. Submissions on behalf of respondent Nos.2, 3 and 4:- 7. Sri Gaurav Mahajan, learned Senior Standing Counsel for the respondent Nos. 2,3 and 4-Income Tax Department submits that....
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.... 11.11.2021 under Section 143(2) read with Section 147 of the Act, 1961 which was followed by his letter dated 18.11.2021. In paragraphs 4 and 6 in the aforesaid letter dated 18.11.2021, the respondent No.2 has stated as under: "4. Enquiries made by the A.O. as sequel to information collected/received: Information uploaded by the DDIT(Inv.), Unit-3, Kanpur regarding unexplained cash deposits of Rs.13,67,24,000/- in this case, has been examined. Necessary verification was made from the entire details available in the ITR, on the database of ITBA and ITD and therefore, I have sufficient form of 'Reason to believe' to frame my opinion. The Information available with this office has been analyzed and I have framed my opinion after due application of all the facts and mind. 6. Basis of forming reason to believe escapement of Income: In light of the details available on records and on the basis of above facts and findings, I have reason to believe that income of Rs.13,67,24,000/- which is chargeable to tax, has escaped the assessment. Thus, I have reasons to believe that this is a fit case for reopening and there is an escapement of income wit....
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....n the basis of this issue are illegal, unconstitutional and unjustified. 3. That the assesse has deposited following sums in cash with other banks: (i) Union Bank of India Rs. 3,41,81,000/- (ii) State Bank of India Rs. 24,000/- The figure of deposit of Rs. 3,41,81,000/- is shown in 26AS and insight portal of the department. 26AS is attached as ANNEXURE-F. Hence the story of deposit of Rs.13,67,24,000/- is baseless and incorrect and all the proceedings on the basis of this information are liable to be quashed. Datewise details of cash deposited with Union Bank of India is attached as ANNEXURE-G. In this connection it is humbly requested that the source and details of cash deposit as per insight postal as referred to in the reasons recorded for initiating the proceedings U/S 148 should be provided to the assesse along with the documentary evidence. 4. That during the year under consideration the assesse has received following cash from different sources: (i) Storage Rent Rs. 1,51,35,495/- (ii) Refund of loan from farmers Rs. 3,15,75,650/- (iii) Interest on farmers loan Rs. 18,94,539/- ....
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....eon are computed on ITBA module. Copy of calculation sheet and notice of demand are annexed herewith forms part of this order. Penalty u/s 271AAC of the I.T. Act, 1961 is initiated for penalty in respect of certain income. 7. The Assessment is hereby made u/s. 147 read with Sec. 144B of the Income-taxAct, 1961 as above and the sum payable or refund of any amount on the basis of the assessment is determined as per the notice of demand. Copy of Assessment Order along with Income Tax Computation sheet from ITBA module, Penalty Notices and Notice of Demand u/s. 156 of the Income-tax Act, 1961 being issued to the assessee." 13. Aggrieved with notice under Section 148 dated 31.03.2021, the order dated 24.03.2022 rejecting the objection and the reassessment order dated 31.03.2022, the petitioner has filed the present writ petition on the ground that these are wholly without jurisdiction. 14. It is undisputed that the figure of cash deposit by the petitioner in its bank account with Union Bank of India is shown in Form 26AS to be Rs.3,41,81,000/-. It had made cash deposit of Rs.24,000/- in its bank account with State Bank of India. Thus, total cash deposit ....
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....tioner for the A.Y. 2017-18 without there being any material disclosing escapement of income by the petitioner. The petitioner has been continuously bringing it to the notice of the respondents that he has not deposited any amount in his bank account i.e. Bank of Baroda and also filed copy of the bank account, a copy of which has also been filed along with supplementary affidavit; and yet the respondents have made addition of Rs. 13,67,24,000/-. Basic principles of rule of law and justice has been deliberately denied to the assessee by the respondents. This prima facie shows conscious attempt to cause serious harassment to the assessee for reasons best known to the respondents. We are frequently coming across orders passed by the respondents including the National Faceless Assessment Centre which show that the respondents have made up their mind to act arbitrarily and not to adhere to the settled principles of law including natural justice and are passing reassessment orders in a whimsical manner. Such prevailing situation causing serious prejudice to the assessees and flagrant violation of basic principles of law by the respondents, needs to be arrested at the earliest. ....
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....sessment order dated 31.03.2022 was passed making addition to Rs. 13,67,24,000/- in the income of the petitioner. The petitioner has filed copy of his Bank account with the Bank of Baroda, Shivrajpur Branch, Kanpur for the F.Y. 2016-17 relevant to the A.Y. 2017-18 which shows that there is no such cash deposit in the aforesaid Bank. Copy of the bank account has already been filed along with certificate of Chartered Accountant with supplementary affidavit dated 30.05.2022, yet the respondents have neither replied the contents of the writ petition nor the contents of the supplementary affidavit. 6. A short counter affidavit has been filed by the respondents. Even in the shortcounter affidavit, the respondents have not filed any evidences which may even indicate remotely that any cash was deposit by the petitioner in his Bank account with Bank of Baroda, Shivrajpur Branch, Kanpur. Thus, the initiation of re assessment proceedings and the impugned assessment order are not only without jurisdiction and perverse but also, the impugned reassessment order and re assessment proceeding violate fundamental right of the petitioner guaranteed under Article 14 and 21 of the Constitution....
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....suance of notice u/s 148, and re-assessment of the case of the petitioner for Assessment Year 2017-18. 4. That it is further most respectfully submitted that in the case of thepetitioner, the amount showing in Insight portal was Rs.13,67,24,000/, which was reported as "Cash Deposits in one or more accounts (other than a current accounts or time deposit) of a person" and does not specify the Bank name. This clearly indicated that cash deposits had been detected by the algorithm in the various accounts of the petitioner, and other linked entities, totalling the aforesaid amount. 5. That it is further most respectfully submitted that the amount ofRs.3,41,81,000/- appears to have been taken as Rs.13,67,24,000/-, which is exactly four times the said amount, as there is reporting error in the PAN of the account relations, the aggregation for the same value of Rs.3,41,81,000/is happening multiple times because the account relations are having same reported PAN. 6. That it is further most respectfully submitted that this possibility was not known to any officers of the Department and they proceeded in good faith and without any malafide intention or otherwise tha....
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....ired to be examined." 19. A counter affidavit on behalf of the respondent Nos.2 and 3 sworn by Arun Kumar Bhatia, Joint Commissioner of Income Tax, Range-1(1), Kanpur dated 25.07.2022 has been filed in which in paragraphs 10, 28 and 31, he stated on the basis of records, as under:- "10. That in order to examine the issue of cash deposit of Rs. 13,67,24,000/in the bank account maintained with Bank of Baroda, Kanpur, the JDIT (Inv.), Unit-III, Kanpur, from where the information pertaining to the said cash deposit was first originated, was requested to furnish detailed/complete investigation report in the matter. The JDIT (Inv.), Unit-1, Kanpur vide letter dated 31.05.2022 has submitted his report in this regard. As per report of the JDIT (Inv.), a Tax Evasion Petition in this case was received which was allotted a Unique Identification Number after categorization as per guidelines of the CBDT. Subsequently, enquiries were conducted in this case after obtaining approval from the prescribed authority. The Departmental database in this case was perused and from the information profile of the assessee [SFT-04] it was found that there are cash deposits amounting to Rs. 13,67,2....
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....come of the assessee under section 68 of the Act, as unexplained cash credits vide order passed u/s.147 r.w.s. 144B of the Act by the NaFAC." 20. In the aforesaid paragraph-10 of the counter affidavit, the respondent Nos.2 and 3 has admitted that information of cash deposit of Rs.13,67,24,000/- was with respect to bank account of the petitioner with Bank of Baroda which first originated from the Joint Director of Income Tax (Inv.) Unit-III, Kanpur who, on request, submitted a verification report vide letter dated 31.05.2022 informing the said cash deposit. In paragrphs 5 and 6 of his counter affidavit, the respondent No.1 has admitted that the information of cash deposit of Rs.13,67,24,000/- is incorrect and the correct figure is Rs.3,41,81,000/-. He stated in paragraph-13 of the counter affidavit that cash deposit of Rs.3,41,81,000/- is reflected in Form 26AS of the petitioner. Perusal of the aforesaid Form 26AS appearing at page-124 of the writ petition, shows that cash deposit by the petitioner is Rs.3,41,81,000/- in the Union Bank of India. Thus, as per own admitted case of the respondents, the cash deposit of Rs.3,41,81,000/- was made by the petitioner in its bank account w....
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.... while making the assessment and again a different or divergent view is reached, it would tantamount to "change of opinion". If the assessing Authority forms an opinion during the original assessment proceedings on the basis of material facts and subsequently finds it to be erroneous; it is not a valid reason under the law for re-assessment. (c) The words "reason to believe" suggest that the belief must be bona fide and must be that of an honest and reasonable person based upon reasonable grounds and that the Income Tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. His vague feeling that there might have been some escapement of income from assessment is not sufficient. The reasons for the formation of the belief must be based on tangible material and must be based on a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular assessmen....
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....3. In paragraphs 27 and 28 of the writ petition, the petitioner has specifically stated that it exercised its right to be heard in the matter by requesting for a hearing through video conferencing within the time stipulated by the respondents-authorities yet even opportunity of hearing through video conferencing was denied. In support of its submissions, it also filed a screen shot asking for hearing through video conferencing which has been annexed as Annexure 12 of the writ petition. The respondent No.4 has not denied the contents of paragraphs 27 and 28 while replying it in paragraph 15 of his counter affidavit dated 23.07.2022. The reasons assigned by him is that the limitation was going to expire on 31.03.2022. The show cause notice was issued by the respondent No.4 on 25.03.2022, the assessee submitted its reply on 25.03.2022 itself and requested for hearing on 26.03.2022. Therefore, by no stretch of imagination, the respondent No.4 can be permitted to take the stand that it denied the opportunity of personal hearing through video conferencing for reason that the limitation was going on to expire on 31.03.2022. In fact, the approach of the respondent No.4 itself proves arbitr....
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.... therein quasi-judicial and administrative process. They constitute the basic elements of a fair hearing, having their roots in the innate sense of man for fair-play and justice which is not the preserve of any particular race or country but is shared in common by all men. The first rule is `nemo judex in causa sua' or `nemo debet esse judex in propria causa sua' that is no man shall be a judge in his own cause. The second rule is `audi alteram partem', that is, `hear the other side'. A corollary has been deduced from the above two rules and particularly the audi alteram partem rule i.e. 'he who shall decide anything without the other side having been heard, although he may have said what is right, will not have been what is right' or in other words, as it is now expressed, `justice should not only be done but should manifestly be seen to be done'. Natural justice is the essence of fair adjudication, deeply rooted in tradition and conscience, to be ranked as fundamental. The purpose of following the principles of natural justice is the prevention of miscarriage of justice. Order without valid reasons - unsustainable:- 29. In the case of M/s. Hindus....
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.... or surmises and if it does anything of the sort, its findings, even though on questions of fact, will be liable to be set aside by this court." 31. In the case of Udhav Das Kewat Ram Vs. CIT 1967 (66) ITR 462, Hon'ble Supreme Court held that Tribunal must consider with due care all material facts and record its findings on all contentions raised before it and the relevant law. 32. An order without valid reasons cannot be sustained. To give reasons is the rule of natural justice. Highlighting this rule, Hon'ble Supreme Court held in the case of The Secretary & Curator, Victoria Memorial v. Howrah Ganatantrik Nagrik Samity and ors., JT 2010(2)SC 566 para 31 to 33 as under : "31. It is a settled legal proposition that not only administrative but also judicial order must be supported by reasons, recorded in it. Thus, while deciding an issue, the Court is bound to give reasons for its conclusion. It is the duty and obligation on the part of the Court to record reasons while disposing of the case. The hallmark of an order and exercise of judicial power by a judicial forum is to disclose its reasons by itself and giving of reasons has always been insisted upon as o....
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....le dealing with an appeal under Section 130 of the Act, the High Court should have examined each question formulated in the appeal with reference to the material taken into consideration by the Tribunal in support of its finding thereon and given its reasons for holding that question is not a substantial question of law. It needs to be emphasised that every litigant, who approaches the court for relief is entitled to know the reason for acceptance or rejection of his prayer, particularly when either of the parties to the lis has a right of further appeal. Unless the litigant is made aware of the reasons which weighed with the court in denying him the relief prayed for, the remedy of appeal will not be meaningful. It is that reasoning, which can be subjected to examination at the higher forums. In State of Orissa Vs. Dhaniram Luhar2 this Court, while reiterating that reason is the heart beat of every conclusion and without the same, it becomes lifeless, observed thus : "8.......Right to reason is an indispensable part of a sound judicial system; reasons at least sufficient to indicate an application of mind to the matter before court. Another rationale is that the affected ....
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....Where procedure required for decision has not been adopted. (vi) Where Tax is levied without authority of law. (vii) Where decision is an abuse of process of law. (viii) Where palpable injustice shall be caused to the petitioner, if he is forced toadopt remedies under the statute for enforcement of any fundamental rights guaranteed under the Constitution of India. (ix) Where a decision or policy decision has already been taken by the Government rendering the remedy of appeal to be an empty formality or futile attempt. (x) Where there is no factual dispute but merely a pure question of law or interpretation is involved." 37. The above principles are supported by law laid down by Hon'ble Supreme Court in the case of Himmatlal Harilal Mehta v. State of Madhya Pradesh, AIR 1954 SC 403, Collector of Customs v. Ramchand Sobhraj Wadhwani, AIR 1961 SC 1506, Collector Of Customs & Excise ,Cochin & Ors. vs A. S. Bava, AIR 1968 SC 13, Dr. Smt. Kuntesh Gupta vs Management Of Hindu Kanya Mahavidyalaya, L.K. Verma v. HMT Ltd. and anr., (2006) 2 SCC 269, Paras 13 and 20, M.P. State Agro Industries Development Corpn. Ltd. & Anr. vs. Jahan Khan (2....
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....ons to believe for escapement of income of the petitioner to tax, was unfounded and the cash deposit which has been shown by the petitioner in its bank account with Union Bank of India has not been disputed at all. That apart, the original assessment of the petitioner was made under Section 143(3) of the Act, 1961 in which Form 26AS as it existed at all relevant point of time, reflects the cash deposit by the petitioner in the Union Bank of India amounting to Rs.3,41,81,000/- which the petitioner assessee has always admitted and has shown in its books of accounts and a copy of statement of deposit was also filed by the petitioner before the respnodent No.4 during reassessment proceedings but arbitrarily the respondent No.4 baselessly assumed cash deposit in the bank account with Bank of Baroda amounting to Rs.13,67,24,000/- whereas as per bank statement of Bank of Baroda, there was no cash deposit. Abuse of Power:- 40. It is settled law that if a public functionary acts maliciously or oppressively and the exercise of power results in harassment and agony then it is not an exercise of power but its abuse. No law provides protection against it. Harassment by public authorities ....
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.... Respondents' Stand - Whether complete go-bye to Quashi-Judicial Function provided under the Act, 1961:- 42. The respondent No.1 has filed the counter affiavit dated 24.07.2022. In paragraph-1 sworn on personal knowledge, it has been stated that the deponent of the counter affiavit has stated that he has read the writ petition, its annexures, stay application, affidavit and the orders dated 18.05.2022, 26.05.2022, 30.05.2022 and the order dated 14.07.2022 passed by this Court and is acquianted with the facts deposed and has been authrorised by the Central Board of Direct Taxes, New Delhi to file the counter affidavit on behalf of the respondent No.1. Paragraphs-7, 8 and 9 of the counter affiadvit filed on behalf of the respondent No.1, i.e. Union of India have been sworn on the basis of records. Paragraphs-7, 8 and 9 of the aforesaid counter affidavit has been quoted above in paragraph-18 of this judgment. In the aforequoted paragraphs-7, 8 and 9 of the counter affidavit, the respondent No.1 has taken a clear stand that the officers of the department are bound by the information provided on the data-base/ portal of the department and it is not for them to question its authencity....
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....no stretch of imagination or the provisions of the Constitution or the law evolved so far by judicial decisions, the stand so taken by the respondent No.1 in paragraphs 7 and 8 of the counter affidavit can be justified or conceived. It appears that either the deponent of the aforesaid counter affidavit namely Sri Shishir Kuamr Jha, Principal Chief Commissioner of Income Tax, U.P. (West) and Uttarakhand Region at Kanpur has stated the real state of affairs prevailing in the income tax department or has shown extreme negligence while making statement on oath on record in paragraphs 7 and 8 of the aforeaid counter affidavit. Quasi-Judicial Function:- 47. In State of H.P. vs. Raja Mahendra Pal and others, (1999) 4 SCC 43 (Paras-8 and 9), Hon'ble Supreme Court explained the quasi-judicial acts and observed that these acts are such acts which mandate an officer the duty of looking into certain facts not in a way which it specially directs but after a discretion, in its nature justicial. The exercise of power by such tribunal or authority contemplates the adjudication of rival claims of the persons by an act of the mind or judgment upon the proposed course of official action. A quas....
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....decisions of this Court delivered in respect of various taxation laws that the assessing authorities exercise quasi-judicial function and they have duty cast on them to act in a judicial and independent manner. If their judgment is controlled by the directions given by the Collector it cannot be said to be their independent judgment in any sense of the word. .........................." (Emphasis supplied by us) 49. In the case of Nareshbhai Bhagubhai and others vs. Union of India and others, (2019) 15 SCC 1, Hon'ble Supreme Court held that necessary requirement of quasi-judicial function is to pass a reasoned order after due application of mind. It further held as under: "21. In the present case, it is the undisputed position that no order as contemplated in the eyes of law was passed by the Competent Authority in deciding the objections raised by the Appellants. A statutory authority discharging a quasi-judicial function is required to pass a reasoned order after due application of mind. In Laxmi Devi v. State of Bihar, (2015) 10 SCC 241, this Court held that: "9. The importance of Section 5-A cannot be overemphasised. It is conceived from natural justice a....
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....would lose its independence to pass an independent order of assessment. If the Assessing Officer passes an order at the instance or dictate of the higher authority, it shall be illegal. 52. For all the reasons aforestated, the stand so taken by the respondent No.1 in paragraphs-7 and 8 of the counter affidavit deserves to be rejected and is hereby rejected and it is directed that the respondent No.1 or other authorities under the Act, 1961 shall not interfere with the quasijudicial function and discharge of statutory duties by the Assessing Officers unless permitted by the Act, 1961. Let a circular be issued by the rspondent No.1 forthwith clarifying the position. 53. In view of the statement made by the respondent No.1 in paragraph10 of the counter affidavit, we direct as under: (i) The respondent No.1 shall ensure that all necessary steps are taken within one month and a mechanism is developed and is put in place within one month so that assessees may not be harassed and may not suffer on account of own fault of the department in its data-base/ portal. (ii) The Respondent No.1 shall provide a mechanism and put it in place within one month from today that t....
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.... to match the might of the State or its instrumentalities. That is provided by the rule of law. It acts as a check on arbitrary and capricious exercise of power. In Rookes v. Barnard14 it was observed by Lord Devlin, 'the servants of the government are also the servants of the people and the use of their power must always be subordinate to their duty of service'. A public functionary if he acts maliciously or oppressively and the exercise of power results in harassment and agony then it is not an exercise of power but its abuse. No law provides protection against it. He who is responsible for it must suffer it. Compensation or damage as explained earlier may arise even when the officer discharges his duty honestly and bona fide. But when it arises due to arbitrary or capricious behaviour then it loses its individual character and assumes social significance. Harassment of a common man by public authorities is socially abhorring and legally impermissible. It may harm him personally but the injury to society is far more grievous. Crime and corruption thrive and prosper in the society due to lack of public resistance. Nothing is more damaging than the feeling of helpl....
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....it should further direct the department concerned to pay the amount to the complainant from the public fund immediately but to recover the same from those who are found responsible for such unpardonable behaviour by dividing it proportionately where there are more than one functionaries." (Emphasis supplied by us) 56. 'Sovereignty' and "acts of State" are two different concepts. The former vests in a person or body which is independent and supreme both externally and internally whereas latter may be act done by a delegate of sovereign within the limits of power vested in him. No civilised system can permit an executive to play with the people of its country and claim that it is entitled to act in any manner as it is sovereign. No legal or political system today can place the State above law as it is unjust and unfair for a citizen to be deprived of his property illegally by negligent act of officers of the State. The need of the State to have extraordinary powers cannot be doubted. But with the conceptual change of statutory power being statutory duty for sake of society and the people the claim of a common man or ordinary citizen cannot be thrown out merely because i....
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.... found that the reassessment proceedings were without jurisdiction. The information on the basis of which the reassessment proceeding was initiated against the petitioner, has been admitted by the respondent to be incorrect. Despite every effort made by the petitioner and the evidences filed by it to establish that there has been no escapement of income to tax and the information on the basis of which reassessment proceeding has been initiated is unfounded, respondents have not even looked into the reply and evidences filed by the petitioner and even his request for personal hearing through video conferencing was denied. Only a day's time was granted to the petitioner to submit reply to the show cause notice in reassessment proceedings which the petitioner submitted within time and yet his request for hearing through video conferencing was declined by the respondent No.4. This shows a complete failure to the observance of rule of law on the part of the respondents. A huge demand of Rs.16,90,61,731/- has been created by the resopndents against the petitioner on totally non-existent and baseless ground and that too without any fault or breach by the petitioner. In the case of Pun....
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....gh Court in this matter is rather on the lower side. Considering the overall conduct of the petitioner No.2 and the corresponding harassment faced by the writ petitioner we find it rather necessary to enhance the amount of costs. Upon our having made these observations, learned counsel for the petitioners has attempted to submit that the questions of law in this case, as regards the operation and effect of Section 129 of Telangana Goods and Services Tax Act, 2017 and violation by the writ petitioner, may be kept open. The submissions sought to be made do not give rise to even a question of fact what to say of a question of law. As noticed hereinabove, on the facts of this case, it has precisely been found that there was no intent on the part of the writ petitioner to evade tax and rather, the goods in question could not be taken to the destination within time for the reasons beyond the control of the writ petitioner. When the undeniable facts, including the traffic blockage due to agitation, are taken into consideration, the State alone remains responsible for not providing smooth passage of traffic. Having said so; having found no question of law being involved; ....