Deepak Modi vs. Assistant Commissioner Of Income Tax Circle 46 (1) & Anr.
Original PDF →Facts
The petitioner, Deepak Modi, filed a writ petition challenging an order dated March 30, 2023, passed under Section 148A(d) of the Income Tax Act, 1961, initiating reassessment proceedings for Assessment Year 2019-2020. The revenue alleged that the petitioner acquired accommodation entries from an entity named New Goodwill Traders, resulting in income escaping assessment amounting to Rs. 65,95,123/-. The petitioner contended that all relevant documents, including purchase bills, e-way bills, lorry receipts, sales invoices, GSTR 2A/2B, and bank statements showing RTGS payments, were provided to the Assessing Officer (AO). The petitioner also argued that the AO failed to follow CBDT guidelines and instructions, specifically regarding verification of portal information and granting an oral hearing. The reassessment proceedings were reportedly triggered by a search and seizure action against the Star Traders Group, with both New Goodwill Traders and Star Traders allegedly involved in providing accommodation entries.
Held
The Court held that the impugned order dated March 30, 2023, passed under Section 148A(d) of the Income Tax Act, 1961, and the consequent notice dated March 30, 2023, issued under Section 148 of the Act, were to be set aside. This decision was primarily based on the admission by the revenue in their affidavit dated May 25, 2023, that no oral hearing was granted to the petitioner before passing the order under Section 148A(d). The Court found that the AO was required to accord a personal hearing to the noticee as indicated in the CBDT guidelines and instructions. Therefore, the Court set aside the impugned order and notice, granting liberty to the AO to pass a fresh order after providing an oral hearing to the petitioner or their authorized representative and passing a speaking order. The ratio decidendi is that failure to grant a mandatory oral hearing before passing an order under Section 148A(d) vitiates the proceedings.
Key Issues
1. Whether the Assessing Officer (AO) conducted the necessary inquiry before directing reassessment proceedings under Section 148A(d) of the Income Tax Act, 1961, as per CBDT guidelines and instructions dated August 22, 2022? 2. Whether the AO erred by not granting an oral hearing to the petitioner before passing the order under Section 148A(d) of the Income Tax Act, 1961, despite the petitioner seeking one? Petitioner's Contentions: - The petitioner argued that all relevant documents were submitted to the AO, demonstrating the genuineness of transactions. - Reliance was placed on CBDT guidelines and instructions dated August 22, 2022, particularly paragraph 3, to assert that the prescribed procedure, including verification of portal information, was not followed by the AO. - The petitioner contended that an oral hearing was sought but not granted, and if granted, it would have clarified the AO's doubts. Revenue's Contentions: - The revenue's stand was that both New Goodwill Traders and Star Traders were engaged in providing accommodation entries, and the petitioner fell within the scope of inquiry due to search actions against these entities. The judgment does not explicitly record further arguments from the revenue regarding the procedural aspects or the petitioner's specific contentions on inquiry and hearing.
Sections Cited
Section 148A, Section 148
AI-generated summary — verify with the full judgment below
W.P.(C) 5737/2023
$~43 * IN THE HIGH COURT OF DELHI AT NEW DELHI %
Date of Decision: 22.11.2023
+ W.P.(C) 5737/2023 & CM No.22472/2023
DEEPAK MODI
..... Petitioner
Through: Mr Ruchesh Sinha, Adv.
versus
ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 46 (1) & ANR.
..... Respondents Through: Ms Priya Sarkar, Standing Counsel for Mr Shlok Chandra, Sr Standing Counsel.
CORAM:
HON'BLE MR. JUSTICE RAJIV SHAKDHER
HON'BLE MR. JUSTICE GIRISH KATHPALIA
[Physical Hearing/Hybrid Hearing (as per request)] RAJIV SHAKDHER, J.: (ORAL)
We had heard the matter at some length on 03.05.2023 and briefly etched out the broad contours of the case. For convenience, the relevant parts of the order dated 03.05.2023 are set forth hereafter:
“2. This writ petition concerns Assessment Year (AY) 2019-2020. 3. The allegation levelled against the petitioner is, that he has acquired accommodation entries, and thus recorded in his books of accounts, bogus transactions with an entity going by the name New Goodwill Traders.
According to the respondents/revenue, as a result of the said accommodation entries, income chargeable to tax amounting to Rs.65,95,123/- has escaped assessment.
Mr Ruchesh Sinha, counsel who appears for the petitioner, has drawn our attention to the reply, and the documents submitted with the said reply, to demonstrate that every relevant document, which included purchase bills issued by New Goodwill Traders, E-way Bill, Lorry receipts and the W.P.(C) 5737/2023
sales invoices were placed before the Assessing Officer (AO).
1 It is Mr Sinha’s contention, that the copies of GSTR 2A/2B were also furnished, along with the bank statement of the subject bank account, wherein payments have been received via RTGS.
2 Mr Sinha has drawn our attention to the CBDT guidelines and instruction dated 22.08.2022 respectively. In support of his plea, that the procedure prescribed therein had not been followed by the AO before triggering reassessment proceedings, inter alia, our attention is drawn to paragraph 3 of the instruction dated 22.08.2022. Based on the provisions of paragraph 3, Mr Sinha says that the CBDT is cognizant of the fact, that the information available on the portal would have to be verified.
A perusal of the impugned order dated 30.03.2023 passed under Section 148A(d) of the Act shows, that the reassessment proceedings qua the petitioner were, perhaps, triggered on account of a search and seizure action being taken out against Star Traders Group.
It is the respondents/revenue’s stand, that both New Goodwill Traders and Star Traders are engaged in providing accommodation entries. The petitioner seems to have come within the scope of enquiry, on account of the search actions taken out against the aforementioned entities.
We may note, that one of the grievances articulated by Mr Sinha is, that even though oral hearing was sought by the petitioner, the same was not granted.
1 It is Mr Sinha’s contention, that if a hearing was granted, perhaps some of the doubts which the AO raised would have got clarified.
A perusal of both the guidelines as well as the instruction issued by the CBDT indicates, that the AO is required to accord personal hearing to the notice.
Mr Shlok Chandra, counsel who appears on behalf of respondents/revenue says, that he will return with instructions on this aspect of the matter.
Accordingly, issue notice.
1 Mr Chandra accepts notice on behalf of the respondents/revenue.
In case instructions are received to resist the writ petition, counter- affidavit will be filed at least three days before the next date of hearing.
List the matter on 26.05.2023. 14. In the meanwhile, there shall be a stay on the continuation of the reassessment proceedings.
Parties will act based on the W.P.(C) 5737/2023
(i) First, there was no inquiry conducted before directing the reassessment proceedings; (ii) Second, had the Assessing Officer (AO) granted an oral hearing, his queries could have been addressed.
Pursuant to the said order, an affidavit dated 25.05.2023 has been filed by the respondents/revenue. The affidavit clearly states that no oral hearing was granted to the petitioner before passing the impugned order dated 30.03.2023 under Section 148A(d) of the Income Tax Act, 1961 [in short, “Act”] concerning Assessment Year (AY) 2019-20. 4. Having regard to the averments made in the aforementioned affidavit filed by the respondents/revenue, according to us, the best way forward would be to set aside the impugned order dated 30.03.2023 passed under Section 148A(d) and the consequent notice of even date i.e., 30.03.2023 issued under Section 148 of the Act, albeit with liberty to the AO to pass a fresh order after hearing the petitioner/assessee.
Accordingly, the impugned order dated 30.03.2023 and the consequent notice of even date i.e., 30.03.2023 issued under Section 148 of the Act are set aside.
1 Liberty is, however, given to the AO to pass a fresh order.
2 Before passing an order, the AO will grant an oral hearing to the petitioner and/or his authorised representative.
3 Needless to add, the AO will pass a speaking order; a copy of which will be furnished to the petitioner/assessee.
The writ petition is disposed of, in the aforesaid terms.
Interim order dated 03.05.2023 shall stand vacated. CM Appl. 22472/2023 is closed. W.P.(C) 5737/2023
Parties will act based on the
Reproduced from the public record of the Delhi High Court. Verify against the court's own copy before relying on it. Income tax judgments are on bharattax.net.