In a recent decision, a Division bench of the Calcutta High Court confirmed the observation of the Single bench of the same court, which stated that the High Court, when exercising its Writ Jurisdiction, cannot assume the role of an Assessing Officer (AO) to examine the facts and evidence, and replace them with its own opinion.
The bench of Acting Chief Justice T.S. Sivagnanam and Justice Hiranmay Battacharyya, while concluding the order passed under Section 148A(d) of the income tax act, 1961 was a speaking order, observed that payment of interest on a cash loan falls within the ambit of unexplained expenditure within the meaning of Section 69C of the Income Tax Act.
The respondent-assessing officer issued notice to appellant-assessee under clause (b) of Section 148A dated March 14, 2023 stating that he has information which suggests that income chargeable to tax for the assessment year 2016-2017 has escaped assessment within the meaning of Section 147 of the Income Tax Act.
A writ petition was filed by him against the order passed by the income tax department under Section 148A(d) of the Income Tax Act and the consequential notice issued under Section 148 of the Income Tax Act.
The Single Bench held that the AO has held that the appellant-assessee has availed cash loan to the tune of Rs. 40,70,00,000/- through finance broker Kaseras, other different lenders and it has also been recorded. There was a huge unexplained expenditure within the meaning of Section 69C of the Income Tax Act and that the cash loan and repayment in cash comes within the crux of the provisions of Section 269SS and Section 269T and other relevant provisions of the Act. Thus, it needs to be analysed to the AO itself.
The appellant, Shyam Sundar Dhanuka filed an intra court appeal against the order passed by the Single bench of the court.
Abhratosh Majumder, counsel who appeared for the appellant-assessee submitted that the assessing officer had not provided the reasons recorded/information which was the basis for initiating proceedings and in particular that such reasons or information must have same rational nexus or live-link with the formation of belief that income of the appellant has escaped assessment.
Further submitted that the AO has not furnished any document which supports to show the cash loan of Rs. 40,70,00,000 availment of the assessee through the finance broker. Also claimed that AO without any independent application of mind and without verification had come to the conclusion that the income of the appellant has escaped assessment.
During the search and seizure action conducted by the AO at various spots of finance brokers Sanvaria and Kasera showed that the appellant assessee was a beneficiary of the said finance broker and has received a cash loan of Rs. 40,70,00,000/- during the assessment year under consideration. And thus the assessee was directed to furnish the same.
Further, on examination of seized documents marked as USK/6 found and seized from the residential premises of finance broker Praveen Kumar Kasera, there was a recording identifying the assessee as a borrower and that he has taken cash loan to the tune of Rs. 40,70,00,000/- during the financial year 2015-2016.
The Court noted that in the seized documents, the finance broker Kasera used a geometrical pattern/figure to represent the loan amount in an unaccounted cash loan account. The AO decoded the geometrical pattern and found the loan amount. Subsequently the same was admitted by the finance broker.
The AO had held that the name of the assessee appears in the seized documents having borrowed Rs. 40,70,00,000/- on a “rukka” and the amount so borrowed is deemed to be income of the assessee and the interest paid by the assessee to the lender is deemed to be unexplained expenditure and the income generated from the application of the loan so taken as unexplained income.
The division bench, in the light of the findings recorded by the assessing officer, observed that the order passed under clause (d) of Section 148 is a non speaking order nor the order to be branded as outcome of non-application of mind. To test the correctness of the order, it is necessary that the disputed question of facts have to be thoroughly analyzed.
Further stated that there are several stakeholders in the entire process which requires deeper probe into the matter and such an exercise cannot be done in exercise of writ jurisdiction. Therefore, it was held that the single bench was fully justified in not entertaining the writ petition and leaving it upon to the appellant to agitate all issues in the reopening proceedings for which notice under Section 148 of Income Tax Act.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
