Sahil Infra Creative Pvt Ltd v. ITO

Case snapshot

Sections / provisions: 148A

Questions before the Court / Tribunal

• Section 148A natural justice: reply under old regime ignored while passing order under new regime.
• What factual, statutory and procedural conditions control the relief?
• How does the operative order apply to the parties and the challenged proceeding?

Material facts and procedural background

========================================================== M/S SAHIL INFRA CREATIVE PVT. LTD. Versus THE INCOME TAX OFFICER WARD 2(1)(3), SURAT ========================================================== Appearance: MR. ADITYA AJGOAKAR WITH MR. BHAUMIK DHOLARIYA(7009) for the Petitioner(s) No. 1 KARAN G SANGHANI with KALPANAK RAVAL(1046) for the Respondent(s) ==========================================================

Heard learned advocate Mr.Aditya Ajgaokar with learned advocate Mr. Bhaumik Dholariya for the petitioner and learned advocate Mr.Karan

3. Noticing the relevant facts, the petitioner engaged in the business as builder, land-organiser, developer of lands and such other infrastructural projects, filed its return of income alongwith computation of income for the Assessment Year 2016-2017 declaring loss of Rs. 8,24,444/- on 4.10.2016. Thereafter, on 30.6.2021, respondent No.1- the Income Tax Officer issued notice under section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) requiring the petitioner to file return of income for Assessment Year 2016-2017. The petitioner filed its return of income under section 139 of the Act on 30.7.2021. The petitioner thereafter requested for copy of reasons recorded from the officer. The notice under section 143(2) of the Act was issued on 27.9.2021 and the respondent No.1 Assessing Officer supplied copy of reasons on the same date.

3.1 In the reasons recorded, respondent No.1 alleged against the petitioner that the petitioner purchased immovable property for consideration of Rs. 30,23,10,000/-. It was further alleged that the petitioner was a shell company which was not actually involved in any kind of business activity, however, was found, according to the Assessing Officer, to have acquired immovable property from income earned by

3.2 It was further alleged that while the assessee company had purchased immovable property, the details of the said transactions were not disclosed in the books of accounts of the petitioner. Therefore, the Assessing Officer concluded that the investment of Rs. 30,23,10,000/- was made for the immovable property by the Assessee from undisclosed source of income and which remained out the ambit of taxation.

Appellant / assessee submissions

Heard learned advocate Mr.Aditya Ajgaokar with learned advocate Mr. Bhaumik Dholariya for the petitioner and learned advocate Mr.Karan

4. Learned advocate for the petitioner submitted that on one hand the petitioner has not received notice under section 148A(b) of the Act, the order under section 148A(d) came to be passed in which the petitioner had no opportunity to put forth his case. He could not defend against the allegations which suggested that income to the tune of Rs. 30,23,10,000/- chargeable to tax escaped the assessment as per the allegations levelled in the notice under section 148A(b) of the Act. It was submitted that respondent no.1 relied on the reasons recorded which were supplied alongwith the notice dated 27.9.2021-the earlier notice. It was submitted that the said objections were never disposed of and therefore could not be said to have been considered by the Assessing Officer at that juncture.

5.3 As per the case of the petitioner such notice was never received by it. It was submitted that the order under section 148A(d) of the Act passed by the Assessing Officer stands in breach of principles of natural justice inasmuch on one hand the objections filed by the assessee to the notice under the unamended section 148 of the Act were not disposed of, the petitioner had no opportunity to file reply to the notice under section 148A(b) of the Act, on the other hand. At both the point of time, the natural justice was violated, it was urged.

Revenue / respondent submissions

4. Learned advocate for the petitioner submitted that on one hand the petitioner has not received notice under section 148A(b) of the Act, the order under section 148A(d) came to be passed in which the petitioner had no opportunity to put forth his case. He could not defend against the allegations which suggested that income to the tune of Rs. 30,23,10,000/- chargeable to tax escaped the assessment as per the allegations levelled in the notice under section 148A(b) of the Act. It was submitted that respondent no.1 relied on the reasons recorded which were supplied alongwith the notice dated 27.9.2021-the earlier notice. It was submitted that the said objections were never disposed of and therefore could not be said to have been considered by the Assessing Officer at that juncture.

5.2.1 The limited case of the petitioner is inter alia that it did not receive notice under section 148A(b) though stated to have been issued by the department. The petitioner came to know from the portal about the order having been passed under section 148A(d) of the Act. What is submitted on behalf of the petitioner is that the response given by the petitioner in form of objections to the notice issued under the unamended provisions may be treated as a reply to the notice under section 148A(b) of the Act to which the petitioner could not file any response.

Court / Tribunal analysis and reasoning

The reasoning is integrated into the packaged record. Read it with the facts, statutory text and operative directions; this editorial article does not invent missing reasons.

Operative decision and relief

5.5 When we compare the unamended provisions and the provisions which were brought about into force with effect from 1.4.2021 in the context of observance of principles of natural justice, it could be easily seen that there exists a common thread. In the unamended provisions pursuant to notice under section 148 of the Act, the assessee was entitled to file his objections and get it disposed of either in terms of acceptance or rejection. If the objections were rejected, the assessee could pursue further remedy in that regard.

(i) The proceedings of the case are remanded to the competent Assessing Officer.

148A(d) and the consequential notice dated 30.07.2022 under Section 148 of the Income Tax Act, 1961 are hereby set aside.

7. The petition stands allowed in terms of the aforesaid order and directions.

Ratio and legal principle

• The packaged judgment addresses Section 148A natural justice: reply under old regime ignored while passing order under new regime. The precise proposition must be read with the Court/Tribunal's reasoning and operative directions.
• Reliance depends on matching the statutory version, jurisdiction, procedural stage and material evidence recorded in the judgment.

Why this judgment matters

This decision is relevant to practitioners and affected parties dealing with section 148a natural justice: reply under old regime ignored while passing order under new regime. Its value lies in showing how the adjudicating forum connected the applicable rule to the proved facts and procedural posture.

Practitioner action points

• Match the statutory version, jurisdiction, procedural stage and decisive evidence before relying on the result.
• Verify current appellate, review and SLP history and any later amendment or controlling authority.
• Attach the complete judgment to the working paper or filing and cite the paragraph/page supporting the proposition.

Does this case match your facts?

Section / provision impact

• 148A - apply the exact version considered in the judgment.

Case network

Similar issue / useful comparison

• NITIN NEMA VS ITO WARD 1(1) JABALPUR & ORS - Madhya Pradesh High Court - Jabalpur
• Uttrakhand Poorv Sainik Kalyan Nigam Ltd. vs. ITO - ITAT Dehradun Circuit Bench
• Jindal Exports and Imports Private Limited vs. DCIT - Delhi High Court

Different outcome / possible distinction

• JM Financial Asset Management Ltd. v. DCIT - Allowed
• Stewart Science College,Cuttack Vs ITO Ward 1(1), Cuttack - Operative order controls

Full judgment and source control

Read / download packaged judgment record

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