M/S. A K Metals Products vs Assessment Unit Of Income Tax Department

C/SCA/9375/2024 ORDER DATED: 09/07/2024

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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/SPECIAL CIVIL APPLICATION NO. 9375 of 2024

========================================================== M/S. A K METALS PRODUCTS Versus ASSESSMENT UNIT OF INCOME TAX DEPARTMENT ========================================================== Appearance: MR DHARAN GANDHI ADVOCATE WITH MR DARSHAN B GANDHI(9771) for the Petitioner(s) No. 1 MR KARAN SANGHANI ADVOCATE WITH MR NIKUNT K RAVAL(5558) for the Respondent(s) No. 1 NOTICE SERVED for the Respondent(s) No. 1 ==========================================================

CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA and HONOURABLE MR. JUSTICE NIRAL R. MEHTA

Date : 09/07/2024

ORAL ORDER

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

[1] Heard learned advocate Mr. Darshan Gandhi for the petitioner

and learned Senior Standing Counsel Mr. Karan Sanghani for the

respondent.

[2] Rule returnable forthwith. Learned Senior Standing Counsel

Mr. Karan Sanghani waives service of notice of Rule for the

respondent.

[3] Having regard to the controversy in narrow compass in the

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matter and with the consent of learned advocates appearing for the

respective parties, the matter is taken up for hearing.

[4] By this petition under Article 226 of the Constitution of India,

the petitioner has prayed to quash and set aside the assessment

order dated 28th March 2024 passed under Section 143(3) read

with Section 144B of the Income Tax Act, 1961 (for short, "the

Act") for the Assessment Year 2022-23.

[5] The brief facts of the case are that the petitioner, who is

engaged in the business of manufacturing, wholesale of metal,

scrap and recycling of metal, filed return of income on 7 th

November 2022 for the year under consideration declaring total

income of Rs.5,57,014/-.

[5.1] The petitioner, thereafter, received an intimation dated 2 nd

June 2023 for scrutiny assessment followed by notice dated 19 th

October 2023 under Section 142(1) of the Act and another notice

dated 23rd October 2023. Thereafter, the show cause notice dated

11th December 2023 was issued by the respondent - Assessing

Officer which was replied on 16th December 2023 by the petitioner.

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Thereafter, notice dated 18th January 2024 and 19th January 2024

was also issued directing the petitioner to furnish details of

unsecured loan, advances and sundry creditors.

[5.2] The petitioner, thereafter, received show cause notice dated

1st March 2024 to show as to why addition of unsecured loan and

other amount under the head of unexplained cash credit under

Section 68 / 69C of the Act should not be made. The petitioner

submitted reply dated 5th March 2024 and 12th march 2024 along

with ledger account details of unsecured loan, advances and copies

of invoices of sundry creditors. The petitioner also submitted the

list and confirmation along with PAN details of lender parties of

unsecured loan and creditors to prove that the petitioner also filed

GST returns to the respondent authority.

[5.3] It is the case of the petitioner that the respondent authority,

after receipt of the reply to the show cause notice, issued summons

under Section 133(6) of the Act to the various parties and

thereafter, the respondent - Assessing Officer, considering the

response to such summons, made addition of Rs.8,96,65,832.2 as

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read with Section 115BBE of the Act and penalty proceedings

under Section 271AAC(1) of the Act was also initiated for levy of

penalty of Rs.3,82,00,000/-.

[6] Learned advocate Mr. Gandhi for the petitioner, therefore,

submitted that the petitioner has not been provided any

opportunity of hearing after submission of the reply to the show

cause notice for the proposed addition to be made and the

respondent - Assessing Officer has undertaken an inquiry and

accordingly, the entire assessment order is vitiated and such order

is required to be quashed and set aside.

[7] In support of his submissions, reliance was placed on the

decision of this Court in the case of MAA Padmavati Exports vs. The

Income Tax Officer, Ward 1(2)(3), Ahmedabad rendered in

R/Special Civil Application No.6918 of 2024.

[8] On the other hand, learned Senior Standing Counsel Mr.

Karan Sanghani for the respondent submitted that the contention

of the assessee that there is a breach of the principles of natural

justice, is not correct as the assessee has not responded to the

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notices and responded to show cause notice under Section 144 of

the Act only. It was further submitted that in view of non-

cooperation shown by the assessee during the course of assessment

proceedings, the Assessing Officer was required to exercise his

power to conduct the third party inquiry by way of notice under

Section 133(6) of the Act.

[9] It was further submitted that the notice issued by the

Assessing Officer on 1st March 2024 and at the same time, the show

cause notice issued under Section 133(6) of the Act to the third

party and hence, such issuance of notice was not mentioned in the

show cause notice for the proposed addition to be made by the

Assessing Officer under Section 69C of the Act.

[10] It was further submitted that it is not binding upon the

Assessing Officer that he has to disclose about the third party

inquiries conducted by him to the assessee because it is the part of

his investigation to arrive at the conclusion in the assessment as the

assessee has not discharged its onus to prove that the transactions

in respect of unsecured loans, purchase are genuine in absence of

any documentary evidence to substantiate such transactions.

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[11] It was, therefore, submitted that in response to the show

cause notice also, the petitioner failed to submit any documentary

evidence to prove the identity, creditworthiness and genuineness of

the transactions and therefore, it was incumbent upon the

Assessing Officer to make inquiry by issuance of notice under

Section 133(6) of the Act to arrive at the conclusion in respect of

the unsecured loan and purchases.

[12] It was, therefore, submitted that the assessee has an

alternative efficacious remedy to challenge the impugned

assessment order by preferring an appeal before the CIT(A) and the

assessee can raise all the contentions which are raised in this

petition. It was, therefore, prayed that the this petition may not be

entertained while exercising extraordinary jurisdiction under

Article 226 of the Constitution of India.

[13] In view of the above submissions made by both the sides, we

are of the opinion that there is a clear variance between the show

cause notice in form of a draft assessment order and the impugned

assessment order passed by the Assessing Officer after issuance of

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notice under Section 133(6) of the Act. Therefore, the entire

assessment order passed by the Assessing Officer is contrary to the

scheme of the faceless assessment as prescribed under Section 144B

of the Act.

[14] It is also not in dispute that the Assessing Officer has not

issued notice under Section 133(6) of the Act prior to the issuance

of show cause notice under Section 144B of the Act comprising the

draft assessment order. Therefore, the assessee could not respond

to the findings which are accorded in the impugned assessment

order by the Assessing Officer on the basis of the inquiry made by

him pursuant to the notice under Section 133(6) of the Act.

Accordingly, the impugned assessment order is in clear violation of

the principles of natural justice.

[15] In the decision in the case of MAA Padmavati Exports

(supra), it was observed by this Court as under:

"[12] It is not in dispute that the Assessing Officer did not supply copy of reply received pertaining to the pursuant to the notice issued under Section 133(6) of the Act. After issuance of the show cause notice in the form of draft

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assessment order, no any opportunity of cross-examination of the parties whose reply is considered to make addition under Section 68 of the Act was granted to the petitioner. This Court, in the case of Dineshkumar Chhaganbhai Nandani (supra) and in the case of Darshan Enterprise (supra) and in the case of Prakashchandra Chhotalal Shah (supra), in similar facts, after referring to the relevant provisions under Section 144B of the Act, allowed the petitions quashing and setting aside the assessment order and remitting the matter back to the Assessing Officer for de novo consideration."

[16] For the foregoing reasons, we are left with no other option

but to quash and set aside the impugned assessment order and

remit the entire matter back to the Assessing Officer for de novo

consideration and to pass a fresh assessment order after providing

all the relied upon documents like the reply received pursuant to

the summons and notice under Section 133(6) of the Act as well as

the other relevant documents of the parties who did not reply to

the summons providing opportunity of cross-examination, if

requested, and after giving an opportunity of hearing to the

petitioner, fresh de novo assessment order may be passed in

accordance with law. Such exercise shall be completed within a

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period of 12 weeks from the date of receipt of the copy of this

order.

[17] This petition is, accordingly, disposed of. Rule is made

absolute to the aforesaid extent. No order as to costs.

(BHARGAV D. KARIA, J)

(NIRAL R. MEHTA,J) CHANDRESH

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