The failure to share material information in tax proceedings leads to a violation of the right to a fair hearing, necessitating the quashing of related orders.

JUDGMENT

Manmohan, J. (Oral)

C.M.No.37355/2022

Exemption allowed, subject to all just exceptions. Accordingly, the application stands disposed of.

W.P.(C) No.12422/2022 & C.M.No.37354/2022

1. Present writ petition has been filed challenging the order dated 26th July, 2022 passed by the Respondent No. 1 under Section 148A(d) of the Income Tax Act, 1961 (`the Act') and the notice dated 26th July, 2022 issued by the Respondent No. 1 to the Petitioner under Section 148 of the Act for the Assessment Year 2014-15 and the consequential proceedings initiated thereto.

2. Learned counsel for the Petitioner states that the impugned order has been passed without application of mind and without considering the response filed by the Petitioner. He states that the Petitioner is a small nontrading company earning only rental income, audited by a reputed firm of auditors, namely Walker Chandiok & Co., LLP since financial year 200405 and has never had any requirement of outside funds. He further states that the company has a single bank account and never had any transaction with Mr.Hasmukh Mehta as alleged.

3. Learned counsel for the Petitioner states that the material forming the basis of the allegation against the Petitioner was not provided along with the letter dated 27th May, 2022. He states that the name of the Petitioner nowhere figures in the Diary or in the statements relied upon by the Respondent No. 1. He further states that even in the tabular information stated to have been prepared on the basis of Diary, the name appears differently on different pages. Consequently, according to him, the show cause notice is vague, non-specific and based on borrowed satisfaction.

4. Issue notice. Mr.Sanjay Kumar, learned senior standing counsel accepts notice on behalf of the Respondents-Revenue. He contends that the investigation wing has found the details of the transaction of Petitioner- Assessee in the seized diary. In the said details, it is clearly mentioned that the Assessee company has received cheques from Shri Hasmukh Mehta amounting to Rs.1,72,00,000/-during the financial year 2013-14 which is not a genuine business transaction as the entities from whom the funds have been received are not doing any business and are paper concerns which are engaged in only providing accommodation entries.

5. A perusal of the paper book reveals that impugned order under Section 148A(d) of the Act has been passed on the ground that the Assessing Officer has certain details which shows that the Assessee Company has received cheques. In fact, the impugned order states:

"...Since the amount of more than Rs.50,00,000/-has been received in the bank account of the assessee, the same is represented in the form of asset hence, the present case satisfied the Section 149(1)(b) of the Income Tax Act, 1961."

6. However, neither in the notice issued under Section 148A(b) of the Act nor in the impugned order passed under Section 148A(d) of the Act, there is any detail of any cheque credited in the bank account of the Petitioner-Assessee and/or any debit entry in the bank account of Mr.Hasmukh Mehta or his front companies.

7. Accordingly, this Court is of the view that the Assessing Officer has not shared the material information stated in the impugned show cause notice issued under Section 148A(b) of the Act as well as in the impugned order passed under Section 148A(d) of the Act despite a specific request made by the Petitioner vide reply dated 07th June, 2022.

8. This Court is of the opinion that the Petitioner has been denied an effective opportunity to file a response/reply