RK Gupta and Son HUF v. Income Tax Officer Ward 58(3) and Anr

1. Allowed, subject to the petitioner filing legible copies of the annexures, at least three days before the next date of hearing. W.P.(C) 17466/2022&CM No.55738/2022 [Application filed on behalf of the petitioner seeking interim relief]

2. Issue notice.

2.1. Mr Ajit Sharma accepts notice on behalf of the respondents.

3. In view of the direction that we intend to pass, Mr Sharma says that a counter-affidavit need not be filed. Accordingly, with the consent of the learned counsel for the parties, the writ petition is taken up for hearing and final disposal at this stage itself.

4. This writ petition is directed against the notice dated 19.05.2022 issued under Section 148A(b) of the Income Tax Act, 1961 [in short “Act”]. Besides this, challenge is also laid to the order dated 27.07.2022 passed under Section 148A(d) of the Act and the consequential notice of even date, i.e., 27.07.2022 issued under Section 148 of the Act.

5. The impugned notice issued under Section 148A(b) of the Act and the material supplied therein, by way of inter-departmental communication dated 15.05.2018, adverts to the following: Sub: Sharing of information of beneficiaries emanating out of survey carried out on 08.11.2017 in case of non-genuine Short Term Capital Gains in scrip M/s Varun Capital Services Ltd. – reg. Please refer to the subject cited above

1. In this regard, please find enclosed herewith survey report in the case of M/s Varun Capital Service Ltd. duly approved by the Pr. CIT-09, New Delhi for necessary action at your end. In this case, the assessee had entered into share transaction with the M/s Kisna Traders Pvt. Ltd. in F.Y. 2014-15 and 2015-16 as below: Name of Beneficiary Date Name of Scrip Quantity Total Amount R.K. Gupta & Sons F.Y. 2014- 22-09- PAGE INDUSTRIES 75 563208 AAQHR2404F 563208 F.Y. 2015- 21-02- BEML Ltd. 500 570170 29-12- BEML Ltd. 600 81931[2] 01-01- Canara Bank 3000 709710 05-01- Canara Bank 3000 699360 29-12- Engineers India 3000 655710 21-12- Fortis Healthcare 2000 344500 21-12- Indian Hotels 5000 537400 04-01- Orchid Chem 5000 290820 04-01- Orchid Chem 4000 232280 01-01- Reliance Infra 2000 1012400 05-01- Reliance Infra 1500 814890 15-01- Reliance Infra 1000 527110 18-01- Reliance Infra 2500 1296900 19-01- Reliance Infra 1600 784320 01-01- Union Bank of India 5000 754700 15-01- Union Bank of India 1000 124190

2. As the jurisdiction over the case lies with you, therefore, the necessary information is being shared with you for action at your end.

7. Mr. Ajit Sharma, senior standing counsel for the respondents says that although the information supplied to the petitioner is not happily worded, what the Assessing Officer (AO) seeks to convey is that the petitioner had entered into transactions with Kisna Traders Pvt Ltd in the relevant period, through a broker going by the name Varun Capital Services Ltd., in respect of shares of companies referred to in the table extracted in departmental communication dated 15.05.2018.

8. According to us all that the communication dated 15.05.2018 shows, is that a survey report was generated vis-à-vis Varun Capital Services Ltd. The said communication also alludes to the fact that assessee had entered into share transaction with Kisna Traders Pvt Ltd in the Financial Years(FY) 2014-15 and 2015-16 in respect of the shares referred to in the table.

8.1. As to how this transaction led the AO to conclude/form an opinion that there was escapement of income is not articulated in the notice issued under Section 148A(b) of the Act.

9. Mr. Ruchesh Sinha, who appears on behalf of the petitioner, says that this was an online trading and related to a genuine transaction between the petitioner and Kisna Traders Pvt Ltd.

10. As adverted to above, in our opinion, the notice issued under Section 148A(b) of the Act should have clearly brought out the allegations against the petitioner.

11. In these circumstances, the impugned notices, both under Section 148 and 148A(b) of the Act, as also the order passed under Section 148A(d) of the Act, are set aside, with liberty to the AO to issue a fresh notice under Section 148A(b) of the Act, wherein the AO will clearly articulate as to how, according to him, the income chargeable to tax has escaped assessment. 11.[1] This notice will be issued within two weeks from the date of service of the order passed today and will accompany whatever material/information is available with the AO.

11.2. The AO will grant further three weeks to the petitioner to respond to the same. Thereafter, the AO will take the next steps in the matter as per law.