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18-01-2020, Ajai Kumar Singh Khaldelial, Section 264, HIGH COURT OF ALLAHABAD
1. Heard Sri Suyash Agarwal, learned counsel for the petitioner as well as Sri Praveen Kumar, learned counsel for the respondents.
2. The petitioner by means of this writ petition has challenged the order passed by the Principal Commissioner, Income Tax, Gorakhpur thereby he has rejected the application preferred by the petitioner under Section 264 of the Income Tax Act, 1961 (hereinafter referred to as “the Act, 1961”).
3. Learned counsel for the petitioner submits that petitioner is propr etor of M/s Purushottam Das Ajai Kumar, Asif Ganj, Azamgarh and is engaged in the business of retail trading of ready made and other clothes in the name of the proprietary concern. For the assessment year 2008-09, the petitioner’s firm filed income tax return which included income of Rs.34,912/- earned from the house property besides business income of Rs.1,70,304/-. The petitioner got his firm’s accounts audited with net profit of Rs.1,61,012/- showing @ 2.00% and gross profit of Rs.8,67,837/- being 44.33% of the gross receipt.
4. It has been further submitted on behalf of petitioner that he disclosed about the advance given to supplier’s account as well as copy of the account of M/s Jalan Synthetics, Varanasi before the assessing authority which clearly demonstrated that on various dates the amount of payment has been deposited by the petitioner in UBI, Varanasi bank on their instructions. It has further been contended that the assessing authority while passing the assessment order for the assessment year 2008- 09, did not raise any objection relating to the aggregate amount of Rs.3,40,000/- deposited on various dates in the bank account of M/s Jalan Synthetics.
5. The assessment proceedings were completed in exercise of power under Section 143(3) of the Act, 1961 on the income of Rs.2 80,004/- by order dated 10.11.2010 and giving appeal effect it was revised at Rs.1,99,804/-.
6. The petitioner received a notice dated 30.03.2013, issued under Section 148 of the Act, 1961, stating therein that the authorities had reason to believe that cash payment of Rs 3,40,000/- had been made by the petitioner to M/s Jalan Synthetics for the assessment year 2008-09, in violation to the provisions of Section 40A(3) of the Act, 1961, which is other than by making payment through crossed account payee cheque or crossed bank draft, as such the same is liable to be disallowed and added back to the income of the pet tioner.
7. The petitioner objected to the notice issued under Section 148 of the Act, 1961 and submitted that he had truly and faithfully disclosed all the facts necessary. He further stated that payment of Rs.3,40,000/- was genuine and that there is no violation of Section 40(3) of the Act, 1961 read with Rule 6DD of the Income Tax Rules, 1962 (hereinafter referred to as “the Rules, 1962”) and further that payment of Rs.3,40,000/- in cash to M/s Jalan Synthetics is also reflected in their ledger accounts and therefore, there was no basis for reopening of the assessment proceedings.
8. The assessing authority not being satisfied by the reply submitted by the petitioner proceeded to make addition of Rs.3,40,000/- in the income of the petitioner and disallowed the benefit/exemption under Section 40A(3) of the Act, 1961 for the reason that payment exceeding Rs.20,000/- was made other than crossed cheque or bank draft.
9. The petitioner being aggrieved by the order dated 14.03.2014, preferred an application under Section 264 of the Act, 1961 before the Principal Commissioner, Income Tax, Gorakhpur on 07.04.2014.
10. By means of impugned order dated 19.01.2016, the Principal Commissioner, Income Tax, Gorakhpur has considered the application of the petitioner and has rejected the same holding that the petitioner had clearly misrepresented in his return as well as audit repor with respect to application of Section 40A(3) of the Act, 1961 read with Rule 6DD of the Rules, 1962 and concluded that the payment made to M/s Jalan Synthetics Ltd. is not covered by any exemption. The assessing authority had carried out only limited examination in good faith with respect to the genuineness of the party and believed the assessee and auditor. He has further stated that there is difference between a document and information and despite documents being on record it was on the basis of the fresh information that the petitioner has concealed h s income in violation of Section 40A(3) of the Act, 1961. It was within the competence and jurisdiction of the authority to reopen the assessment under Section 148 of the Act, 1961 and therefore up held the order passed by the assessing authority.
11. Assailing the order of the Principal Commissioner, Income Tax, Gorakhpur, the petitioner has urged that the revenue has misinterpreted the provisions of Section 40A(3) of the Act and Rule 6DD of the Rules, 1962 and that the amount of Rs.3,40,000/-, deposited on various dates in the bank account of M/s Jalan Synthetics, would be covered under Rule 6DD(c)(v) of the Rules, 1962 as the same has been done by use of “electronic clearing system” through the Bank. It is further submitted that there was no new information in possession of respondent no. 2 for invoking reassessment under Section 147 of the Act, 1961, as the documents on the basis of which re-assessment has taken place, were already on record at the time of original assessment and same can not be converted as fresh information in the course of examination by the audit party.
12. Sri Praveen Kumar, learned counsel for the respondents on the other hand has submitted that scope of Section 264 of the Act, 1961 is very limited and in exercise of powers the Principal Commissioner, Income Tax, Gorakhpur is empowered to hold limited enquiry into the grounds raised by the assessee and thereupon examining and passing appropriate orders. Power under Section 264 of the Act, 1961 cannot be equated with the power of appeal which lies to the appeal under Section 246 of the Act and in this regard he has submitted that the Principal Commissioner, Income Tax has duly enquired into the allegations made by the assessee and has rejected the application after due consideration of the same and therefore there was no infirmity in order rejecting the application preferred by the assessee and concluded that the writ petition be dismissed.
13. On merits Sri Praveen Kumar, learned counsel for the respondents submits that the assessee had made misrepresentation in his returns, declaring that no amount was admissible or it is liable under Section 40A(3) of the Act and Rule 6DD of the Rules, 1962 and same was also mentioned in the audit report under Section 44AB of the Act, 1961. he also submitted that only account number of M/s Jalan Synthetics was submitted by the assesseeand no proof that the amount of payment had been deposited on their instructions. He further vehemently urged that the assessee had failed to prove that payment to M/s Jalan Synthetics was not made by cheque or bank draft on account of some business exigency, as the cash payment made by the petitioner was in contravention to the provisions of Section 40A(3) of the Act, 1961.
14. With regard to the issue regarding reopening of the assessment under Section 147 of the Act, 1961, he has submitted that the assessing authority had recorded sufficient reasons with regard to the fact that certain items of income though taxable had escaped notice of the assessing authority and