2023 (11) TMI 1222 - HC - Income Tax

Validity of reopening proceedings - notice u/s 148A(b) is not either digitally or manually signed - HELD THAT - With the authorities being unable to dispute that the notice under Section 148A(b) of the IT Act is not either digitally or manually signed and with the proposition enunciated by in Prakash Krishnavtar Bharadwaj vs. Income Tax Officer 2023 (1) TMI 428 - BOMBAY HIGH COURT being applicable wherein held held that because the notice is not signed either digitally or manually, the same would be invalid. The petition must be disposed of on the ground that the first respondent could not have continued the proceedings based on 148A(b) notice. However, the authorities must be reserved with liberty, subject to all just exceptions in law, to initiate further proceedings

Summary

Issues Involved: The impugned notice under Section 148A(b) of the Income Tax Act, subsequent adjudication order under Section 148A(d), notice under Section 148, assessment order under Section 147 read with Section 144, and penalty orders and demand notices.

Notice under Section 148A(b) of the IT Act:
The petitioner challenged the notice issued under Section 148A(b) of the IT Act, contending that all further proceedings must fail due to the lack of a digital signature. The petitioner's counsel cited a decision of the High Court of Bombay, emphasizing that the notice without a digital signature renders subsequent proceedings invalid.

Employment with M/s Varshitha Enterprises:
During the relevant financial year, the petitioner was employed with M/s Varshitha Enterprises and was authorized to operate the concern's bank account. The petitioner used cash received from currency sales to recharge mobiles and make payments to M/s Idea Cellular, reflecting these transactions in the income tax returns.

Business Commencement and Tax Liability:
In the subsequent assessment year, the petitioner started his own business, M/s Gagan Enterprises, selling currency for mobile recharge. The petitioner's income was determined based on the gross turnover, with a tax liability below Rs.3,00,000 at a rate of 3%. It was argued that the first respondent lacked jurisdiction to initiate proceedings based on the cash deposits treated as business turnover.

Validity of Notice and Jurisdiction:
The petitioner's counsel asserted that the notice under Section 148A(b) lacking a digital signature rendered the proceedings invalid. The High Court of Bombay's decision was cited to support the argument that without a digital or manual signature, the notice is invalid, depriving the first respondent of jurisdiction to continue the proceedings.

Reserve to Issue Fresh Notice:
While acknowledging the invalidity of the notice, the authorities were requested to reserve the right to issue a fresh notice if permissible under Section 149 of the IT Act. The petitioner's counsel suggested that any further proceedings should align with the defense presented in the petition.

Court's Opinion and Disposition:
The Court considered the lack of a digital or manual signature on the notice under Section 148A(b) and applied the precedent set by the High Court of Bombay. Consequently, the petition was allowed, and all impugned notices and orders were quashed, emphasizing that the first respondent could not proceed based on the flawed notice. The authorities were granted the liberty to initiate further proceedings, subject to legal exceptions.

Conclusion:
The High Court of Karnataka ruled in favor of the petitioner, declaring the impugned notices and orders as invalid due to the absence of a digital signature on the initial notice under Section 148A(b) of the IT Act. The decision highlighted the importance of procedural compliance and upheld the petitioner's contention that subsequent proceedings must fail based on the flawed notice.