# SR Cold Storage, Kanpur U.P v. U.O.I. & Ors

- **Citation:** (2022) 8 ILRA 183
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-08-11
- **Case number:** Writ Tax No. 723 of 2022
- **Bench:** Surya Prakash Kesarwani, Jayant Banerji
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/sr-cold-storage-kanpur-u-p-v-u-o-i-ors-48739
- **Pages:** 34

## Headnote

A. Tax Law - Income Tax Act, 1961 -
Sections 147/148, 142(1) & 246A - The
words "reason to believe" suggest that
the belief must be bona fide and must be
that of an honest and reasonable person
based upon reasonable grounds and that
the Income Tax Officer may act on direct
or circumstantial evidence but not on
mere suspicion, gossip or rumour. His
vague feeling that there might have been some
escapement of income from assessment is not
sufficient. In other words, such material on
which the assessing Authority bases its opinion
must not be arbitrary, irrational, vague, distant
or irrelevant. If the grounds for formation of
"reason to believe" are of an extraneous
character, the same would not warrant
initiation of proceedings u/s 147 of the
Act, 1961. (Para 21)

Reassessment of income u/s 147 cannot
be made on change of opinion - If the
assessing Authority forms an opinion during the
original assessment proceedings on the basis of
material facts and subsequently finds it to be
erroneous; it is not a valid reason under the law
for re-assessment. (Para 21)

As per own admitted case of the respondents,
the cash deposit of Rs. 3,41,81,000/- was made
by the petitioner in its bank account with UBI
and there was absolutely no cash deposit by the
petitioner in Bank of Baroda whereas the entire
reassessment proceedings u/s 147/148 of the
Act, 1961 against the petitioner, was initiated on
the alleged information of cash deposit of Rs.
13,67,24,000/- by the petitioner in its bank
account with Bank of Baroda. Thus, the reason
to believe for initiating proceedings u/s 147/148
was totally unfounded and false. In fact
initiation of proceedings and passing the
impugned reassessment order dated 31.03.2022
is a glaring example of highhandedness,
arbitrary actions and abuse of power by the
respondents on the one hand and on the other
184 INDIAN LAW REPORTS ALLAHABAD SERIES
hand, flagrant violation of principles of natural
justice by them. (Para 20)

B. Natural Justice - The principles of
natural justice are those rules which have
been laid down by the Courts as being the
minimum protection of the rights of the
individual against the arbitrary procedure
that may be adopted by a judicial, quasijudicial and administrative authority while
making an order affecting those rights.
These rules are intended to prevent such
authority from doing injustice. Even an
administrative order which involves civil
consequences must be consistent with the
rules of natural justice. (Para 26)

Audi alteram partem - The first rule is
'nemo judex in causa sua' or 'nemo debet
esse judex in propria causa sua' that is no
man shall be a judge in his own cause. The
second rule is 'audi alteram partem', that is,
'hear the other side'. A corollary has been
deduced from the above two rules and particularly
the audi alteram partem rule i.e. 'he who shall
decide anything without the other side having
been heard, alth

## Text

_Characters 0–39,969 of 116,719. This is a partial read: ask again with offset=39969 for what follows._

8 All. SR Cold Storage, Kanpur U.P. Vs. U.O.I. & Ors.
183
the impugned judgments are modified. The
amount of Rs.1 Lakh along with interest
@9% per annum from the date of the order of
the Permanent Lok Adalat as well as the
amount of penalty of Rs.75,000/- to be
deposited before the Permanent Lok Adalat
within a period of six weeks and shall be
released in favour of the opposite parties
forthwith after due verification of their
identities. If any amount was deposited
earlier that shall be adjusted against the total
amount to be paid by the petitioner-Insurance
company in pursuance of the order passed
today.

21. For the foregoing reasons, as
mentioned above, the petitions are partly
allowed in so far, it relates to reduction of
amount of penalty imposed under Clause
22(b) of the agreement only.

22. Let a copy of this judgment/order be
placed in the records of Writ-C Nos. 1005294
of 2014, 1003370 of 2014, 1007020 of 2014
& 1007019 of 2014.

23. The petitions are therefore, disposed
of in the manner as indicated above.
----------
(2022) 8 ILRA 183
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: ALLAHABAD 11.08.2022

BEFORE

THE HON'BLE SURYA PRAKASH
KESARWANI, J.
THE HON'BLE JAYANT BANERJI, J.

Writ Tax No. 723 of 2022

SR Cold Storage, Kanpur U.P. ...Petitioner
Versus
U.O.I. & Ors. ...Respondents

Counsel for the Petitioner:
Sri Abhinav Mehrotra, Sri Satya Vrata
Mehrotra

Counsel for the Respondents:
A.S.G.I., Sri Gaurav Mahajan, Sri Anant
Kumar Tiwari

A. Tax Law - Income Tax Act, 1961 -
Sections 147/148, 142(1) & 246A - The
words "reason to believe" suggest that
the belief must be bona fide and must be
that of an honest and reasonable person
based upon reasonable grounds and that
the Income Tax Officer may act on direct
or circumstantial evidence but not on
mere suspicion, gossip or rumour. His
vague feeling that there might have been some
escapement of income from assessment is not
sufficient. In other words, such material on
which the assessing Authority bases its opinion
must not be arbitrary, irrational, vague, distant
or irrelevant. If the grounds for formation of
"reason to believe" are of an extraneous
character, the same would not warrant
initiation of proceedings u/s 147 of the
Act, 1961. (Para 21)

Reassessment of income u/s 147 cannot
be made on change of opinion - If the
assessing Authority forms an opinion during the
original assessment proceedings on the basis of
material facts and subsequently finds it to be
erroneous; it is not a valid reason under the law
for re-assessment. (Para 21)

As per own admitted case of the respondents,
the cash deposit of Rs. 3,41,81,000/- was made
by the petitioner in its bank account with UBI
and there was absolutely no cash deposit by the
petitioner in Bank of Baroda whereas the entire
reassessment proceedings u/s 147/148 of the
Act, 1961 against the petitioner, was initiated on
the alleged information of cash deposit of Rs.
13,67,24,000/- by the petitioner in its bank
account with Bank of Baroda. Thus, the reason
to believe for initiating proceedings u/s 147/148
was totally unfounded and false. In fact
initiation of proceedings and passing the
impugned reassessment order dated 31.03.2022
is a glaring example of highhandedness,
arbitrary actions and abuse of power by the
respondents on the one hand and on the other
184 INDIAN LAW REPORTS ALLAHABAD SERIES
hand, flagrant violation of principles of natural
justice by them. (Para 20)

B. Natural Justice - The principles of
natural justice are those rules which have
been laid down by the Courts as being the
minimum protection of the rights of the
individual against the arbitrary procedure
that may be adopted by a judicial, quasijudicial and administrative authority while
making an order affecting those rights.
These rules are intended to prevent such
authority from doing injustice. Even an
administrative order which involves civil
consequences must be consistent with the
rules of natural justice. (Para 26)

Audi alteram partem - The first rule is
'nemo judex in causa sua' or 'nemo debet
esse judex in propria causa sua' that is no
man shall be a judge in his own cause. The
second rule is 'audi alteram partem', that is,
'hear the other side'. A corollary has been
deduced from the above two rules and particularly
the audi alteram partem rule i.e. 'he who shall
decide anything without the other side having
been heard, although he may have said what is
right, will not have been what is right' or in other
words, as it is now expressed, 'justice should not
only be done but should manifestly be seen to be
done'. Natural justice is the essence of fair
adjudication, deeply rooted in tradition and
conscience, to be ranked as fundamental.
The purpose of following the principles of
natural
justice
is
the
prevention
of
miscarriage of justice. (Para 28)

The show cause notice was issued by the
respondent No. 4 on 25.03.2022, the assessee
submitted its reply on 25.03.2022 itself and
requested for hearing on 26.03.2022. Therefore,
by no stretch of imagination, the respondent
No. 4 can be permitted to take the stand that it
denied the opportunity of personal hearing
through video conferencing for reason that the
limitation was going on to expire on 31.03.2022.
In fact, the approach of the respondent No. 4
itself proves arbitrary exercise of powers and
denial of principles of natural justice by him.
(Para 23)

In the absence of a notice of the kind and
reasonable
opportunity,
the
order
passed
becomes wholly vitiated. Thus, it is but essential
that a party should be put on notice of the case
before any adverse order is passed against him.
It is an approved rule of fair play. (Para 25)

C. Order is unsustainable without valid
reasons - Reason is the heartbeat of every
conclusion. It introduces clarity in an order and
without the same, it becomes lifeless. Reasons
substitute
subjectivity
by
objectivity.
Absence of reasons renders the order
indefensible/unsustainable
particularly
when the order is subject to further
challenge before a higher forum. Non
recording of reasons, non consideration of
admissible evidence or consideration of
inadmissible evidence renders the order to
be unsustainable. (Para 32, 33)

In the present set of facts, we find that despite
that material disclosed by the assessee before
the respondent Nos. 2 and 4 and despite
specific stand taken by him that he has not
deposited any cash amount in his bank account
with Bank of Baroda what to say of Rs.
13,67,24,000/-, the aforesaid respondents have
neither considered the objection/reply nor
recorded any reasons for its rejection. Thus,
right to reason which is an indispensable part of
a judicial system, has been deliberately violated
by the respondents. (Para 34)

D. Alternative remedy-when not bar -
Article 226 of the Constitution of India
confers very vide powers on High Courts
to
issue
writs
but
this
power
is
discretionary and the High Court may refuse
to exercise the discretion if it is satisfied that the
aggrieved person has adequate or suitable
remedy elsewhere. It is a rule of discretion
and not rule of compulsion or the rule of
law. Even though there may be an
alternative remedy, yet the High Court
may entertain a writ petition depending
upon the facts of each case. It is neither
possible nor desirable to lay down inflexible rule
to be applied rigidly for entertaining a writ
petition. (Para 36)

If gross injustice is done and it can be
shown that for good reason the court
should interfere, then notwithstanding the
alternative
remedy
which
may
be
8 All. SR Cold Storage, Kanpur U.P. Vs. U.O.I. & Ors.
185
available..., a writ court can in an
appropriate case exercise its jurisdiction
to do substantive justice. Normally of course
the provisions of the Act would have to be
complied with, but the availability of the writ
jurisdiction should dispel any doubt which a
citizen has against a high-handed or palpable
illegal order which may be passed by the
assessing authority. (Para 38)

Objection regarding maintainability of the writ
petition on the ground of alternative remedy, is
not tenable on the facts of the present case. In
the present set of facts, in the absence of any
valid information for invoking jurisdiction u/s
147/148
of
the
Act,
1961,
the
entire
proceedings are without jurisdiction. (Para 35)

E. Abuse of Power - It is settled law that if
a public functionary acts maliciously or
oppressively and the exercise of power
results in harassment and agony then it is
not an exercise of power but its abuse. No
law provides protection against it. Harassment
by public authorities is socially abhorring and
legally impermissible which causes more serious
injury to society. In modern society no authority
can arrogate to itself the power to act in a
manner which is arbitrary. (Para 40)

From the stands taken by the respondent
No. 1 in the counter affidavit, it is evident
that all settled principles of law, duty to
discharge
quasi-judicial
function
and
observance of statutory provisions of the
Act, 1961 have been given complete gobye
and
participation
of
assessees
in
proceedings u/s 148A or 148 or 147 of the Act,
1961
would
remain
an
empty
formality,
inasmuch as the Assessing Officer would create
liability on assessees only on the basis of data
fed in the data base/portal of the department
and would not like to adjudicate the matter in
accordance with law so as to take risk of
initiation of disciplinary proceedings against
himself. (Para 45)

F. An order passed by quasi-judicial
authorities on the dictates of the higher
authority is illegal and being without
jurisdiction, is a nullity. An Income Tax
Officer while passing an order of assessment,
performs a quasi-judicial function. It is one thing
to say that while making the orders of
assessment the Assessing Officer shall be bound
by the statutory circulars issued by CBDT but it
is another thing to say that the assessing
authority
exercising
quasi-judicial
function
keeping in view the scheme contained in the
Act, would lose its independence to pass an
independent order of assessment. If the
Assessing Officer passes an order at the
instance or dictate of the higher authority,
it shall be illegal. (Para 51)

Quasi-Judicial Function - A quasi-judicial
function has been termed to be one which
stands
midway
a
judicial
and
an
administrative function. The primary test is
as to whether the authority alleged to be a
quasi-judicial, has any express statutory duty to
act judicially in arriving at the decision in
question. If the reply is in affirmative, the
authority would be deemed to be quasi-judicial,
and if the reply is in the negative, it would not
be. Therefore, an authority is described as a
quasi-judicial when it has some of the attributes
or trappings of judicial functions, but not all.
(Para 47)

The stand so taken by the respondent No. 1 in
the counter affidavit is hereby rejected and it is
directed that the respondent No. 1 or other
authorities under the Act, 1961 shall not
interfere with the quasi-judicial function and
discharge of statutory duties by the Assessing
Officers unless permitted by the Act, 1961.
(Para 52)

G. Accountability - 'Sovereignty' and "acts
of State" are two different concepts. The
former vests in a person or body which is
independent and supreme both externally and
internally whereas latter may be act done by a
delegate of sovereign within the limits of power
vested in him. No civilised system can
permit an executive to play with the
people of its country and claim that it is
entitled to act in any manner as it is
sovereign. No legal or political system
today can place the State above law as it
is unjust and unfair for a citizen to be
deprived of his property illegally by
negligent act of officers of the State. The
need of the State to have extraordinary powers
cannot be doubted. But with the conceptual
186 INDIAN LAW REPORTS ALLAHABAD SERIES
change of statutory power being statutory duty
for sake of society and the people the claim of a
common man or ordinary citizen cannot be
thrown out merely because it was done by an
officer of the State even though it was against
law and negligent. Needs of the State, duty
of its officials and right of the citizens are
required to be reconciled so that the rule
of law in a Welfare State is not shaken.
(Para 56)

Prevailing state of affairs clearly reflects that in
the absence of any effective system of
accountability
of
the
erring
officers,
the
harassment of the assessees and breach of
principles of natural justice by the Officers is
resulting in uncontrolled situation. The practice
of frequently violating principles of natural
justice, non consideration of replies of assessees
under one pretext or the other or rejecting it
with one or two lines orders without recording
reasons for rejection, is gradually increasing
which needs to be taken care of immediately by
the respondents at the highest level, otherwise
prevailing situation of arbitrary approach and
breach of principles of natural justice may not
only adversely affect the assessees who pay
revenue to the Government, but also may
develop a perception amongst people/assessees
that it is difficult to get justice from the
authorities in statutory proceedings. (Para 57)

H. Imposition of Cost - When a case is
decided in favour of a party, the Court can
award cost as well in his favour. Such cost
should be in real and compensatory terms
and not merely symbolic. There can be
exemplary costs as well when the appeal
is completely devoid of any merit. Time
has come to take next step viz. recovery
of cost from such officers who take such
frivolous decisions of filing appeals, even
after knowing well that these are totally
vexatious and uncalled for appeals. Such
an order of recovery of cost from the officer
concerned be passed only in those cases where
appeal is found to be ex-facie frivolous and the
decision to file the appeal is also found to be
palpably irrational and uncalled for. (Para 58)

It is evident that the respondents have
acted arbitrarily, without jurisdiction, in
breach of principles of natural justice and
abused the power conferred under the Act,
1961 and thus created a huge demand of
income
tax
of
Rs.
16,90,61,731/-.
The
reassessment proceedings were without
jurisdiction. The information on the basis of
which
the
reassessment
proceeding
was
initiated against the petitioner, has been
admitted by the respondent to be incorrect.
Despite every effort made by the petitioner and
the evidences filed by it to establish that there
has been no escapement of income to tax and
the
information
on
the
basis
of
which
reassessment proceeding has been initiated is
unfounded, respondents have not even
looked into the reply and evidences filed
by the petitioner and even his request for
personal
hearing
through
video
conferencing was denied. Only a day's
time was granted to the petitioner to
submit reply to the show cause notice in
reassessment
proceedings
which
the
petitioner submitted within time and yet
his request for hearing through video
conferencing
was
declined
by
the
respondent No. 4. This shows a complete failure
to the observance of rule of law on the part of
the respondents. A huge demand of Rs.
16,90,61,731/- has been created by the
respondents against the petitioner on
totally non-existent and baseless ground
and that too without any fault or breach
by the petitioner. (Para 58)

The respondents have acted arbitrarily, illegally
without jurisdiction, caused harassment to the
petitioner and abused power conferred under
the Act, 1961, which resulted in creation of
illegal
demand
of
income
Tax
of
Rs.
16,90,61,731/-. In result, the writ petition is
allowed with cost of Rs. 50,00,000/- on the
respondents, which shall be deposited in Prime
Minister National Relief Fund within three weeks
from today. The impugned
notice dated
31.03.2021 u/s 148, the impugned order dated
24.03.2022 and the impugned reassessment
order dated 31.03.2022 for the Assessment Year
2017-18 u/s 147 r/w Section 144B of the Act,
1961 and all consequential proceedings are
hereby quashed and directions are issued. (Para
60, 61)

I.
Words
and
Phrases
-
'civil
consequences' - It encompasses infraction of
8 All. SR Cold Storage, Kanpur U.P. Vs. U.O.I. & Ors.
187
not merely property or personal rights but of
civil liberties, material deprivations, and nonpecuniary damages. In its wide umbrella comes
everything that affects a citizen in his civil life.
(Para 27)

Writ
petition
allowed
with
cost
of
Rs.50,00,000/- on the respondents. (E-4)

Precedent followed:

1. Uphill Farms Pvt. Ltd. Vs U.O.I. & anr., Writ
Tax No. 518 of 2022, decided on 25.04.2022
(Para 21)

2. Uma Nath Pandey & ors. Vs St. of U.P. & anr.,
(2009) 12 SCC 40 (Para 24)

3. M/s Hindustan Steels Ltd. Rourkela Vs A.K.
Roy & ors., (1969) 3 SCC 513 (Para 29)

4. Omar Salay Mohd. Sait Vs Commissioner of
Income Tax, Madras, AIR 1959 SC 1238 (Para
30)

5. Udhav Das Kewat Ram Vs CIT, 1967 (66) ITR
462 (Para 31)

6. The Secretary and Curator, Victoria Memorial
Vs Howrah Ganatantrik Nagrik Samity & ors., JT
2010(2) SC 566 (Para 32)

7. Chandana Impex Pvt. Ltd. Vs Commissioner
of Customs, New Delhi, 2011 (269) E.L.T. 433
(S.C.) (Para 33)

8. Himmatlal Harilal Mehta Vs St. of M. P., AIR
1954 SC 403 (Para 37)

9. Collector of Customs Vs Ramchand Sobhraj
Wadhwani, AIR 1961 SC 1506 (Para 37)

10. Collector Of Customs & Excise ,Cochin &
Ors. Vs A. S. Bava, AIR 1968 SC 13 (Para 37)

11. Dr. Smt. Kuntesh Gupta Vs Management Of
Hindu Kanya Mahavidyalaya, 1988 AWC 347;
1987 EC 334

12. L.K. Verma Vs HMT Ltd. & anr., (2006) 2
SCC 269 (Para 37)

13. M.P. State Agro Industries Development
Corp. Ltd. & anr. Vs Jahan Khan, (2007) 10 SCC
88 (Para 37)

14. Dhampur Sugar Mills Ltd. Vs St. of U.P. &
ors., (2007) 8 SCC 338 (Para 37)

15. BCPP Mazdoor Sangh Vs NTPC, (2007) 14
SCC 234 (Para 37)

16. Rajasthan State Electricity Board Vs U.O.I.,
(2008) 5 SCC 632 (Para 37)

17. Mumtaz Post Graduate Degree College Vs
University of Lucknow, (2009) 2 SCC 630 (Para
37)

18.
Godrej
Sara
Lee
Ltd.
Vs
Assistant
Commissioner (AA), (2009) 14 SCC 338 (Para
37)

19. U.O.I. Vs Mangal Textile Mills (I) (P) Ltd.,
(2010) 14 SCC 553 (Para 37)

20. U.O.I. Vs Tantia Construction (P) Ltd.,
(2011) 5 SCC 697 (Para 37)

21. Southern Electricity Supply Co. of Orissa Ltd.
Vs Sri Seetaram Rice Mill, (2012) 2 SCC 108
(Para 37)

22. St. of M.P. Vs Sanjay Nagaich, (2013) 7 SCC
25 (Para 37)

23. St. of H.P. Vs Gujarat Ambuja Cement Ltd.,
(2005) 6 SCC 499 (Para 37)

24. Star Paper Mills Ltd. Vs St. of U.P. & ors., JT
(2006) 12 SC 92 (Para 37)

25. St. of Tripura Vs Manoranjan Chakraborty,
(2001) 10 SCC 740 (Para 37)

26. Paradip Port Trust Vs Sales Tax Officer & ors.
(1998) 4 SCC 90 (Para 37)

27. Feldohf Auto & Gas Industries Ltd. Vs U.O.I.
(1998) 9 SCC 710 (Para 37)

28. Isha Beebi Vs Tax Recovery Officer (1976) 1
SCC 70 (Para 37)
188 INDIAN LAW REPORTS ALLAHABAD SERIES
29.
Whirlpool
Corp.
Vs
Registrar
of
Trademarks (1998) 8 SCC 1 (Para 37)

30.
Guruvayur
Devasworn
Managing
Committee Vs C.K. Rajan (2003) 7 SCC 546
(Para 37)

31.
St.
of
Tripura
Vs
Manoranjan
Chakraborty, (2001) 10 SCC 740 (Para 38)

32. St. of H.P. Vs Raja Mahendra Pal & ors.,
(1999) 4 SCC 43 (Para 47)

33. Province of Bombay Vs Khusaldas S.
Advani, AIR 1950 SC 222 (Para 47)

34. R. Vs Electricity Commissioners, (1924) 1
KB 171; (1924) 130 LT 164 (Para 47)

35. Orient Paper Mills Ltd. Vs U.O.I., (1970)
3 SCC 76 (Para 48)

36. Nareshbhai Bhagubhai & ors. Vs U.O.I. &
ors., (2019) 15 SCC 1 (Para 49)

37. U.O.I. & ors. Vs Karvy Stock Broking Ltd.,
(2019) 11 SCC 631 (Para 50)

38. Commissioner of Income Tax, Shimla Vs
Greenworld Corporation Parwanoo, (2009) 7
SCC 69 (Para 51)

39. Lucknow Development Authority Vs M.K.
Gupta, 1994 SCC (1) 243 (Para 54)

40. N. Nagendra Rao & Co. Vs St. of A.P.,
AIR 1994 SC 2663 (Para 56)

41. Nabco Products Pvt. Ltd.Vs U.O.I. & ors.,
Writ Tax No.997 of 2022, Judgment dated
03.08.2022 (Para 57)

42. Punjab State Power Corp. Ltd. Vs
Atma Singh Grewal, (2014) 13 SCC 666
(Para 58)

43. Assistant Commissioner (ST) & others Vs
M/s Satyam Shivam Papers Pvt. Ltd. & anr.,
Special Leave to Appeal (C) No.21132 of
2021 (Para 59)

Precedent cited by respondents:

1. Katiyar Cold Storage Pvt. Ltd. Vs U.O.I. &
ors., Writ Tax No. 202 of 2022 (Para 7)

Present
petition
assails
notice
dated
31.03.2021 issued u/s 148, by Income Tax
Officer,
Ward-1(2)(3),
Kanpur;
reassessment order dated 31.03.2022 and
order dated 30.03.2021.

(Delivered by Hon'ble Surya Prakash
Kesarwani, J.)

1. Heard Sri Abhinav Mehrotra,
learned counsel for the petitioner, Sri S.P.
Singh, learned Additional Solicitor General
of India, assisted by Sri Anant Kuma Tiwari,
learned counsel for the respondent no.1 and
Sri
Gaurav
Mahajan,
learned
Senior
Standing Counsel for the Income Tax
Department- Respondent Nos. 2,3, and 4.

2. This writ petition has been filed
praying for the following relief:

"I. To issue a writ, order or
direction in the nature of CERTIORARI
quashing the Impugned Notice issued under
Section 148 of the Income Tax Act Dated
31.03.2021 [Annexure No. 2 (coll)] r/w
Order Dt. 24.03.2022 [Annexure No. 9]
issued by the Respondent No.2 and the
connected proceedings for Reassessment of
Income for A.Y. 2017-18.

II. To issue a writ, order or
direction in the nature of Certiorari
Quashing the Re-Assessment Order for the
Assessment Year 2017-18, Dt. 31.03.2022
[Annexure No.13] which is made in gross
violation of law and principles of Natural
justice.

III. To issue a writ, order or
direction in the nature of MANDAMUS
declaring that Amendment caused to the
Income Tax Act, 1961, vide Section 42 of
the Finance Act, 2022, OMITTING SubSection 9 of Section 144B of the Income
8 All. SR Cold Storage, Kanpur U.P. Vs. U.O.I. & Ors.
189
Tax Act, is wholly unconstitutional and bad
in law.

IV. To issue a writ, order or
direction in the nature of CERTIORARI
quashing the Order Dt. 30.03.2021 issued
under Section 151 of the Income Tax Act,
by Respondent No.3 [Annexure No.2 (coll)]
and
the
connected
proceedings
for
Reassessment of Income for A.Y. 2017-18."

3. By order dated 26.05.2022, the
relief No.III has been deleted on the
statement made by the petitioner's counsel
that the Relief No.III is not being pressed.

4. This writ petition was heard at
length
on
18.05.2022,
26.05.2022,
30.05.2022, 05.07.2022, 14.07.2022 and
05.08.2022 and the judgment was reserved
on 05.08.2022.

Submissions
on
behalf
of
the
petitioner:-

5. Learned counsel for the petitioner
submits that according to own admission of
the respondents, information on the basis of
which proceeding under Sections 147/148
of the Income Tax Act, 1961 was sought to
be initiated was totally unfounded and yet
the misleading counter affidavits have been
filed by them. The assessee has been
harassed continuously by the respondents.
The National Faceless Assessment Center
is total failure and insight portal of the
department has been made to cause
harassment
to
the
assessees.
The
information collected on the insight portal
of the department is not correct. Even reply
of the assessee has not been considered at
all by the Assessing Officer. In the reassessment order, despite every material
placed by the assessee before the Assessing
Officer-respondent
no.4,
there
is
no
whisper in the re-assessment order about
consideration of the reply. The entire
proceedings under Sections 147/148 of the
Income Tax Act, 1961 against the assessee
is wholly without jurisdiction and the result
of arbitrary exercise of power and gross
abuse of power. In fact the initation of the
proceedings and passing of the impugned
reassessment order, is a glaring example of
conscious and deliberate abuse of the
powers by the respondents in the name of
faceless assessment procedure. Practically
the assessees are not being heard at all and
they are not in a position to place and
demonstrate their stand and to support it by
documentary evidences, as available with
them. This Court passed a detailed order
dated 26.05.2022 and yet the respondentsauthorities have no fear of law and are still
trying to justify their action while at the
same time admitting the information to be
not correct. By order dated 30.05.2022 this
Court required the respondents to show
cause as to why exemplary cost may not be
imposed upon them and yet no cause has
been shown in their respective counter
affidavits filed before this Court. He
submits that the writ petition may be
allowed
with
exemplary
cost
and
accountability of the officer may be fixed
so that there may be some check on
arbitrary exercise of power and abuse of
power by the respondents and transparency
in the assessment process may be ensured.

6. Learned counsel for the petitioner
has referred paragraph Nos. 6,7,8,9, and 10
of the counter affidavit dated 24.07.2022
filed on behalf of the respondent no.1 and
submits that the averments made therein
show complete collapse of the system in
the Income Tax Department. The deponent
of the counter affidavit dated 24.07.2022
filed on behalf of Union of India-
respondent no.1 is the Principal Chief
Commissioner and he does even know
190 INDIAN LAW REPORTS ALLAHABAD SERIES
basic principles of assessment and quasi
judicial function of the assessing officer. If
the averments made in paragraph Nos.
6,7,8,9, and 10 of the counter affidavit filed
on behalf of the respondent no.1 are
accepted, then entire assessment process
would be an empty formality. From the
state of affairs as are prevailing presently as
reflected from the paragraph Nos. 6,7,8,9,
and 10 of the counter affidavit filed on
behalf of the respondent no.1, it is evident
that even basic principles of Rule of law
have been given complete goby and
assessing officer are under threat of the top
level or higher authorities that if they want
to do justice or want to discharge quasi
judicial
function,
they
may
face
disciplinary action.

Submissions on behalf of respondent
Nos.2, 3 and 4:-

7. Sri Gaurav Mahajan, learned
Senior Standing Counsel for the respondent
Nos. 2,3 and 4-Income Tax Department
submits
that
against
the
impugned
reassessment
order,
appeal
lie
under
Section 246A of the Income Tax Act, 1961
and therefore, writ petition may be
dismissed on the ground of alternative
remedy. He relied upon judgment dated
09.05.2022 in Writ Tax No. 202 of 2022
(Katiyar Cold Storage Private Limited
Versus Union of India and 2 others). He
referred to paragraph nos. 4 and 5 of the
counter affidavit dated 25.07.2022 filed on
behalf of the respondent Nos. 2 and 3 and
submits that in insight portal the cash
deposited by the petitioner was shown as
Rs.13,67,24,000/- in the bank account of
the Bank of Baroda, Kanpur, which was
4 times of the actual cash deposit of
Rs.3,41,81,000/- in Union Bank of India. In
Insight portal it was shown as Rs.
13,67,24,000/-, which information was
uploaded by the Deputy Director Income
Tax (Inv.), Unit-III, Kanpur.

Submissions
on
behalf
of
Respondent No.1:-

8. Learned Additional Solicitor
General
of
India
submits
that
the
information received and used against the
assessee which was made basis to initiate
reassessment proceeding and to pass the
impugned reassessment order was the result
of mistake on the part of the respondents.
He referred to paragraph Nos.6,7,8,9 and
10 of the counter affidavit dated 24.07.2022
filed on behalf of the respondent no.1 and
sworn by Shishir Jha, Principal Chief
Commissioner of Income Tax, U.P (West)
and Uttarakhand Region at Kanpur.

Discussion and Findings:-

9. Briefly stated facts of the present
case are that the petitioner is a partnership
firm engaged in the business of running a
cold-storage. It filed its return of income on
17.10.2017 for the Assessment Year 201718
declaring
a
total
income
of
Rs.11,55,016/-. The assessment of the
petitioner was completed by the Assessing
Officer under Section 143(3) of the
Income Tax Act, 1961 (hereinafter referred
to as 'the Act, 1961') accepting the total
income as declared by the petitioner. On
31.03.2021, the Assessing officer issued a
notice to initiate proceedings under Section
147/148 of the Act, 1961 alleging that an
information has been received that the
petitioner has deposited a sum of
Rs.13,67,24,000/- in its bank account
which is undisclosed income and escaped
assessment
to
tax.
The
petitioner
repeatedly requested the Assessing Officer
to supply the reasons recorded but instead
of supplying the reasons the respondent
8 All. SR Cold Storage, Kanpur U.P. Vs. U.O.I. & Ors.
191
No.2 issued notice dated 11.11.2021 under
Section 143(2) read with Section 147 of the
Act, 1961 which was followed by his letter
dated 18.11.2021. In paragraphs 4 and 6 in
the aforesaid letter dated 18.11.2021, the
respondent No.2 has stated as under:

"4. Enquiries made by the A.O.
as
sequel
to
information
collected/received:

Information uploaded by the
DDIT(Inv.), Unit-3, Kanpur regarding
unexplained
cash
deposits
of
Rs.13,67,24,000/- in this case, has been
examined.

Necessary verification was made
from the entire details available in the ITR,
on the database of ITBA and ITD and
therefore, I have sufficient form of ''Reason
to believe' to frame my opinion. The
Information available with this office has
been analyzed and I have framed my
opinion after due application of all the
facts and mind.

6. Basis of forming reason to
believe escapement of Income:

In light of the details available
on records and on the basis of above facts
and findings, I have reason to believe that
income of Rs.13,67,24,000/- which is
chargeable to tax, has escaped the
assessment. Thus, I have reasons to
believe that this is a fit case for
reopening and there is an escapement of
income
within
the
meaning
of
Explanation 2(a) to Section 147 of the
Income Tax Act, 1961."

10. The petitioner filed its detailed
objections before the respondent No.2
vide letter dated 26.11.2021 in which it
submitted that the reasons recorded are
neither correct nor proper nor honest
which may give jurisdiction to the
Assessing Officer to issue notice under
Section 148 of the Act, 1961. However,
without disposing of the objection of the
petitioner, the respondent No.4 (National
Faceless Assessment Centre, New Delhi)
issued a notice under Section 142(1) of
the
Act,
1961.
Subsequently,
the
objection dated 26.11.2021 filed by the
petitioner was rejected by the respondent
No.4 by order dated 24.03.2022 and a
show cause notice/ draft assessment order
dated 25.03.2022 was issued requiring
the petitioner as to why addition of
Rs.13,67,24,000/-
be
not
made.
Paragraph 4.1 and 5 of the show cause
notice/
draft
assessment
order,
is
reproduceced below:

"4.1 As per record / information
available with the Department it is seen
that during the financial year 2016-17
relevant to A.Y. 2017-18 there are cash
deposits of Rs.13,67,24,000/- made by
the assessee firm at Bank of Baroda,
Kanpur, which is not commensurate with
turnover and return of income filed by the
assessee, firm. Hence cash deposits of Rs.
13,67,24,000/- made by the assessee is
added to the total income of the assessee
as income u/s. 68 of the Income lax Act,
1961 as unexplained cash credit. Penalty
u/s 271AAC(1) of the I.T. Act, 1961 is
initiated in respect of certain income.
 [Addition: Rs. 13,67,24,000/-]

5.
Subject
to
the
above
discussion, total income of the assessee is
computed as under:

Total Income declared as per
return
:
Rs. 11,55,020

As discussed in para 4.1
:

Rs. 13,67,24,000/-

Total Assessed Income: Rs.
13,78,79,020/-"

11. The petitioner submitted a reply to
the aforesaid show cause notice dated
192 INDIAN LAW REPORTS ALLAHABAD SERIES
25.03.2022. In paragraphs 2, 3 and 4 of
his reply, the petitioner has stated as
under:

"2.That regards cash deposited
in bank amounting to Rs. 13,67,24,000/-
in Bank of Baroda during the year
under consideration, we would like to
inform you that we have not deposited
any amount in cash in Bank of
Baroda. The allegation levied by your
honour regarding deposit of cash with
Bank of Baroda is totally baseless and
against
the
facts
hence
all
the
proceedings on the basis of this issue
are
illegal,
unconstitutional
and
unjustified.

3.
That
the
assesse
has
deposited following sums in cash with
other banks:

(I) Union Bank of India

Rs. 3,41,81,000/-

(ii) State Bank of India

Rs. 24,000/-

The figure of deposit of Rs.
3,41,81,000/- is shown in 26AS and
insight portal of the department. 26AS is
attached as ANNEXURE-F. Hence the
story of deposit of Rs.13,67,24,000/- is
baseless and incorrect and all the
proceedings
on
the
basis
of
this
information are liable to be quashed.

Datewise
details
of
cash
deposited with Union Bank of India is
attached as ANNEXURE-G.

In this connection it is humbly
requested that the source and details of
cash deposit as per insight postal as
referred to in the reasons recorded for
initiating the proceedings U/S 148
should be provided to the assesse along
with the documentary evidence.

4. That during the year under
consideration the assesse has received
following cash from different sources:

(I)
Storage Rent

Rs.
1,51,35,495/-

(ii)
Refund of loan from farmers

Rs. 3,15,75,650/-

(iii)
Interest on farmers loan

Rs. 18,94,539/-

TOTAL
Rs. 4,86,05,684/-

Against the total receipt of cash
amounting to Rs.4,86,05,684/- the assesse
has
deposited
an
amount
of
Rs.3,42,05,000/- only in different bank
accounts."

12. Thereafter, without any whisper
as to consideration of the reply of the
petitioner and the documentary evidences
filed along with the aforesaid reply, the
respondent No.4 passed the impunged
reassessment order dated 31.03.2022
under Section 147 read with Section 144B
of the Act, 1961 for the Assessment Year
2017-18, as under:-

"Return
of
Income
for
the
Assessment Year 2017-18 was filed by the
assessee, firm on 17.10.2017 u/s. 139
declaring total income of Rs. 11,55,016/-

2. Subsequently, the case was reopened after obtaining prior approval of
competent authority by issuing notice
u/s.148 dated 31.03.2021 which was duly
served after recording reasons to believe
that Income had escaped assessment on
account of non-disclosure of fully and truly
all material facts available on record.

3. In response, the assessee filed
return of income u/s. 148 on 28.04.2021
declaring total income of Rs. 11,55,020/-.
Subsequently notice u/s. 143(2) and 142(1)
of the Income-tax Act, 1961 is issued and
duly served upon the assessee.

4. The assessee furnished details
and submitted explanation which are
considered.

4. FACTS OF THE CASE:
8 All. SR Cold Storage, Kanpur U.P. Vs. U.O.I. & Ors.
193

4.1 As per record / information
available with the Department it is seen that
during the financial year 2016-17 relevant
to A.Y. 2017-18 there are cash deposits of
Rs13,67,24,000/- made by the assessee firm
at Bank of Baroda, Kanpur, which is not
commensurate with turnover and return of
income filed by the assessee, firm. Hence
cash deposits of Rs13,67,24,000/- made by
the assessee is added to the total income of
the assessee as income u/s. 68 of the Income
Tax Act, 1961 as unexplained cash credit.

Penalty u/s 271AAC(1) of the I.T.
Act, 1961 is initiated in respect of certain
income.

[Addition: Rs. 13,67,24,000/-]

5. Subject to the above discussion,
total income of the assessee is computed as
under:

Total Income declared as per
return :
Rs. 11,55,020

As discussed in para 4.1:

Rs. 13,67,24,000/-

Total Assessed Income :

Rs. 13,78,79,020/-

6. Subject to the above, the total
income of the assessee for the assessment
year 2017-18 and tax liability thereon are
computed on ITBA module. Copy of
calculation sheet and notice of demand are
annexed herewith forms part of this order.

Penalty u/s 271AAC of the I.T. Act,
1961 is initiated for penalty in respect of
certain income.

7. The Assessment is hereby made
u/s. 147 read with Sec. 144B of the Incometax Act, 1961 as above and the sum payable
or refund of any amount on the basis of the
assessment is determined as per the notice of
demand.

Copy of Assessment Order along
with Income Tax Computation sheet from
ITBA module, Penalty Notices and Notice of
Demand u/s. 156 of the Income-tax Act, 1961
being issued to the assessee."

13. Aggrieved with notice under
Section 148 dated 31.03.2021, the order
dated 24.03.2022 rejecting the objection
and
the
reassessment
order
dated
31.03.2022, the petitioner has filed the
present writ petition on the ground that
these are wholly without jurisdiction.

14. It is undisputed that the figure of
cash deposit by the petitioner in its bank
account with Union Bank of India is shown
in Form 26AS to be Rs.3,41,81,000/-. It
had made cash deposit of Rs.24,000/- in its
bank account with State Bank of India.
Thus, total cash deposit made by the
petitioner
in
its
bank-accounts
was
Rs.3,42,05,000/-. Along with his reply
dated 25.03.2022, the petitioner has filed
various documents as Annexures A, B, C,
D, E, F, G and H including its copy of
Form 26AS, details of cash deposit in
Union Bank of India and copy of
statement of bank account with Bank of
Baroda etc. for the Financial Year 201617. However, perusal of the aforequoted
impugned
reassessment
order
dated
31.03.2022 and rejection of objection of the
petitioner by order dated 24.03.2022 shows
that there is not a word of consideration of
the reply or objections submitted by the
petitioner.

15. On these facts, this Court passed a
detailed
order
dated
26.05.2022.
Paragraphs 7 and 8 of the order of this
Court dated 26.05.2022 is reproduced
below:

"7. From the show cause notice
and the reply to it by the petitioner, it prima
facie appears that the assessee has
completely denied deposit of any cash in
Bank
of Baroda. He
has
disclosed
information about cash deposit in his bank
account in Union Bank of India and State
194 INDIAN LAW REPORTS ALLAHABAD SERIES
Bank of India. Prima facie, it appears that
the respondent No.4 has very casually
made addition without any discussion or
without reference to any evidence in
respect of the alleged cash deposit of of
Rs.13,67,24,000/- of the assessee in his
bank account in Bank of Baroda.

8.Learned ASGI and learned
counsel for the respondent Nos.2, 3 and 4
pray for and are granted three days time to
obtain instructions. The petitioner shall
also
file
a
supplementary
affidavit
annexing therewith copy of his bank
account in Bank of Baroda for the
Financial Year 2016-17."

16. The aforesaid order passed by this
Court dated 26.05.2022 was followed by
order dated 30.05.2022, as under:-

"Heard Sri Abhinav Mehrotra,
learned counsel for the petitioner, Sri S.P.
Singh, learned Additional Solicitor General
of India, learned counsel for the respondent
no.1 and Sri Manu Ghildiyal, learned
counsel for the respondent nos. 2, 3 and 4.

Learned counsel for the petitioner
has filed today supplementary affidavit,
which is taken on record.

This case prima facie shows
high handedness and arbitrary exercises
of powers by the respondents including
the National Faceless Assessment Centre
who are not ready to adhere to the basic
principles of law and justice. An addition
of Rs.13,67,24,000/- has been made in the
income of the petitioner for the A.Y. 201718 without there being any material
disclosing escapement of income by the
petitioner.
The
petitioner
has
been
continuously bringing it to the notice of
the respondents that he has not deposited
any amount in his bank account i.e. Bank
of Baroda and also filed copy of the bank
account, a copy of which has also been
filed along with supplementary affidavit;
and yet the respondents have made
addition of Rs. 13,67,24,000/-.