Challenge on Income Tax Demand Based on assessment u/s 147 Not Maintainable before HC: Orissa HC dismisses Writ Petition [Read Order]

Shri Samir Kundu, the petitioner questioned the legality, impropriety and justness of demand raised to the tune of Rs.1,23,78,764/- pertaining to the Assessment Year 2020-21 [relevant to Financial Year 2019-20] by way of assessment framed under Section 147 read with 144 of the Income Tax Act, 1961, vide Order dated 26.03.2025 of Income Tax Officer, Ward-3(2), Purulia , the petitioner has approached this Court insisting to invoke extraordinary jurisdiction under the provisions of Articles 226 and 227 of the Constitution of India.

The returns under Section 139 of the Income Tax Act, 1961 (“IT Act”) furnished by the petitioner, proprietor of a concern carrying on its business in the name and style “Shri Krishna Enterprises” situated within the district of Angul, Odisha State, being subject to scrutiny, a notice under Section 148A(b) was issued based on information supplied by the DDIT (Inv)-2(3), Bhubaneswar that amount representing input tax credit under the Goods and Services Tax Act, 2017.

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On obtaining approval of the Principal Commissioner of Income Tax, Asansol as required under Section 151 of the said Act, notice under Section 148 after observing statutory formality under Section 148A that certain amount has escaped assessment of income, was issued contemplating initiation of proceeding.

Responding to the notices under Section 142 of the IT Act directing for supply of information, though the petitioner citing bereavement in the family and serious health issues sought for adjournment(s), having imposed penalty vide Order dated 19.03.2025 under Section 272A(1), the opposite party No.2 rejected such prayer by issuing letter dated 21.03.2025.

The Assessing Officer framed assessment under Section 147 read with Section 144 of the IT Act vide Order dated 26.03.2025 by adding the amount stating it to be wrongful claim treating it to be bogus purchase transactions disclosed in the return of income and raised demand.

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The assessment order is assailed with the contention that, the petitioner had genuine transactions with M/s. Utsav Enterprises as there was physical movement of goods from the place of said supplier to the destination accompanied by ewaybills and supported by tax invoices and he is aggrieved by treating the transactions with other taxable persons, whose registration certificates under the Goods and Services Tax Act are alleged to have been cancelled, as bogus, before any information is received at his end.

It is requested that given an opportunity by extending time to furnish documents/evidences, the petitioner could convince the Assessing Officer that the transactions were genuine and the claim made in the self-assessment returns is just and proper.

A detailed Show Cause Notice was issued to the petitioner eliciting the result of investigation with respect to alleged bogus purchase transactions made with certain named suppliers leading to initiation of proceeding for assessment on best of judgment under Section 144 of the IT Act.

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From the sequence of events and taking into consideration the averments contained in the writ petition, it unequivocally leads to construe that it is well within the knowledge of the petitioner that the assessment would get time-barred by 31.03.2025.

The petitioner having not responded and chosen to participate in the proceeding, even though medical certificate indicates he was maintaining sound health on and from 07.02.2024, he appears to have dragged the proceeding to the fag-end of the limitation period and sought for one month’s accommodation by submitting a petition dated 19.03.2025 purported to be a reply to show cause notice dated 11.03.2025.

The nature of the allegation against the Petitioner is that the Petitioner, in collusion with other entities has taken substantial benefit of ITC without sale of any goods or services. This strikes at the root of the Input Tax Credit facility which is recognised in the GST regime.

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It was observed that when disputed questions of fact are involved which can be dealt with by the authorities vested with power under the IT Act, the Court restrains to entertain the writ petition keeping in view the fact that it is the petitioner who has taken the proceeding to the fag-end of statutory limitation for framing assessment.

“However, it goes without saying that the factual details discussed above are taken out for the purpose of deciding whether to entertain writ petition; but the same would not impose fetter on the statutory authorities to decide and adjudicate merit of the issues, if raised before them in the event circumstances so arise.”, the division bench of Chief Justice, Harish Tandon and Justice Murahari Sri Raman.

The writ petition is dismissed.

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