Calcutta High Court: While deciding a dispute regarding the validity of impugned order under the Income Tax Act, 1961 (the Act), where the appellant challenged the assessing officer’s findings and raised objections related to procedural aspects, a division bench comprising of T.S. Sivagnanam,* CJ., and Hiranmay Bhattacharyya, J., upheld the assessing officer’s order, emphasizing the importance of adhering to legal standards in tax assessments and the limited scope of writ jurisdiction in interfering with factual determinations.
Factual Matrix
In the instant matter, the assessing officer, initiated proceedings against the appellant based on information suggesting that income chargeable to tax for the assessment year 2016-2017 had escaped assessment under Section 147 of the Act. It was alleged that the appellant had availed himself of a cash loan of Rs. 40,70,00,000/- through finance broker Kaseras and other lenders during the assessment year in question and this resulted in substantial unexplained expenditure within the meaning of Section 69C of the Act, and it raised issues under Sections 269SS and 269T and other relevant provisions of the Act.
The assessing officer issued a show-cause notice to the appellant, asking for an explanation and supporting documents regarding the alleged transactions. The appellant replied, stating that no document was furnished to prove the cash loan, and that the assessing officer had not conducted a proper inquiry/investigation as required by Section 148 of the Act.
The assessing officer, after considering the reply and examining the evidence, concluded that the appellant had indeed availed a cash loan and had failed to explain it adequately. Consequently, the assessing officer issued a notice under Section 148 of the Act to reopen the assessment for the relevant year.
The appellant filed a writ petition challenging an order passed by the assessing officer (respondent 1) under Section 148A(d) of the Act, dated 07-04-2023, along with the consequential notice issued under Section 148 of the Act. The appellant contended that the assessing officer’s conclusions were based on the mere observation of “potential borrowers/lenders,” but the officer later clarified that credible evidence of actual borrowings existed.
The writ court observed that the order in question was based on substantial evidence and materials related to the alleged transactions. The Court vide order dated 08-05-2023 held that in its writ jurisdiction the Court cannot substitute its opinion for that of the assessing officer. The appellant filed an intra-court appeal against the order dated 08.05.2023 passed by the writ court, challenging the same.
Moot Point
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Whether the assessing officer’s order under Section 148A(d) of the Act was legally valid?
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Whether the writ court has jurisdiction to interfere with the assessing officer’s findings based on facts and evidence?
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Whether the appellant’s objections regarding reasons recorded, lack of inquiry, and procedural irregularities were valid?
Appellant’s Contentions
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The assessing officer did not provide the appellant with adequate reasons or information as the basis for initiating proceedings.
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The statutory scheme of Section 148 requires an inquiry before issuing a notice under Section 148A(b).
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The assessing officer reached conclusions without proper verification and independent application of mind.
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The reassessment initiated based on the investigation wing’s report was legally flawed.
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The order in the writ petition failed to address the appellant’s objections raised in response to the notice under Section 148A(b).
Respondent’s Contentions
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The writ court correctly held that disputed questions of fact were beyond its purview.
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There was sufficient evidence on record to support the assessing officer’s order under Section 148A(d).
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The appellant could raise all issues during the reopening proceedings by providing documents and evidence.
Court’s Assessment
The Court observed that the assessing officer had provided credible evidence of actual borrowings by the appellant, refuting the appellant’s claim that the proceedings were initiated merely on the basis of potential borrowers/lenders. It was observed that the payment of interest on cash loan falls within the ambit of unexplained expenditure within the meaning of Section 69C of the Act.
The Court emphasized that the writ court cannot substitute its opinion for that of the assessing officer when substantial evidence and materials support the officer’s findings. The Court observed that the assessing officer had followed the necessary procedures and had adequate grounds for reopening the assessment.
The Court also highlighted that the order under Section 148A(d) of the Act was not a non-speaking order, nor did it violate principles of natural justice or inherent jurisdiction. It was based on factual findings and material evidence.
Court’s Verdict
The Court held that the order passed by the assessing officer under Section 148A(d) of the Act was not a non-speaking order and did not suffer from a lack of application of mind. The order was based on factual findings and material evidence, and it could not be interfered with through a writ petition. The Court also found that there was no violation of the principles of natural justice or procedural irregularities.
The Court dismissed the appeal, affirming the decision of the single bench, and concluded that the appellant had not established a case for interference with the order passed by the assessing officer.
[Shyam Sunkar Dhanuka v. Union of India, 2023 SCC OnLine Cal 2550, order dated 30-08-2023]
*Judgment by Justice T.S. Sivagnanam
Advocates who appeared in this case :
Mr. Abhrotosh Majumder, Sr. Adv. Mr. Sourav Bagaria, Mr. Arup Nath Bhattacharya, Mr. Arya Bhattacharya, Counsel for the Appellant
Mr. Tilak Mitra, Mr. Amit Sharma, Counsel for the Respondent/State