2022 (6) TMI 33 - HC - Income Tax

Reopening of assessment - Notice issued u/s 148A(b) - as argued no opportunity for personal hearing was provided to the Petitioner Petitioner states that approval under Section 151 of the Act has only been taken for passing the order under Section 148A(d) of the Act and not for issuance of notice under Section 148 - HELD THAT - Reassessment in the present case was sought to be initiated merely for verification. This Court is of the view that even if the reassessment was being done for verification in accordance with Explanation 1 to Section 148, nothing prevented the AO from conducting an enquiry with respect to the said information in accordance with Section 148A(a) of the Act. In any event, it was all the more necessary in the present case for the AO to thoroughly scrutinise the contentions and submissions advanced by the petitioner-assessee before passing an order under Section 148A(d) of the Act. This Court is of the view that since the impugned order under Section 148A(d) of the Act had been passed on 31st March, 2022 i.e. after receipt of the detailed reply by the Petitioner dated 24th March, 2022, the AO should have considered the same as it was available with him/her on record. By not considering the reply of the Petitioner dated 31st March, 2022, the mandate of Section 148A(c) of the Act has been violated as it casts a duty on the Assessing Officer, by using the expression shall , to consider the reply of the petitioner/assessee in response to notice under Section 148A(b) of the Act before making an order under Section 148A(d) of the Act. This Court is also of the opinion that significance of issuance of a show cause notice at a stage prior to issuance of a reassessment notice under Section 148 of the Act has been lost on the Respondents.Consequently, this Court is of the opinion that a progressive as well as futuristic scheme of reassessment whose intent is laudatory has in its implementation not only been rendered nugatory but has also had an unintended opposite result. Consequently, the impugned order dated 31st March, 2022 issued under Section 148A(d) of the Act and the notice dated 31st March, 2022 issued under Section 148 of the Act are quashed and the matter is remanded back to the Assessing Officer for a fresh determination. The Assessing Officer is directed to pass a fresh reasoned order under Section 148A(d) of the Act after considering the Petitioner s detailed reply dated 24th March, 2022 in accordance with law within eight weeks. In the event the Assessing Officer wants certain clarification or would like the petitioner s response to any specific information received by the revenue, it shall be at liberty to give a supplementary notice.

Summary

Issues Involved:
1. Challenge to Show Cause Notice under Section 148A(b) of the Income Tax Act.
2. Challenge to Order under Section 148A(d) of the Income Tax Act.
3. Challenge to Notice under Section 148 of the Income Tax Act.
4. Approval under Section 151 of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Challenge to Show Cause Notice under Section 148A(b) of the Income Tax Act:
The petitioner contested the Show Cause Notice dated 17th March 2022, arguing that it was arbitrary and based on information from the petitioner’s own returns and records of transactions conducted in the normal course of business. The petitioner asserted that no adverse remarks were made regarding these transactions, and the notice lacked specific details about what was wrong with the transactions or the apprehensions of the Assessing Officer.

2. Challenge to Order under Section 148A(d) of the Income Tax Act:
The petitioner argued that the Order dated 31st March 2022 under Section 148A(d) was arbitrary and cryptic, contemplating a huge sum of Rs 3,84,12,17,094/- as having escaped assessment without considering the nature of the petitioner’s business. The petitioner had provided a detailed clarification in response to the show cause notice, which was allegedly not considered by the Assessing Officer. The court found that the impugned order was indeed cryptic and did not mention what was wrong with the transactions or the specific points on which clarification was required.

3. Challenge to Notice under Section 148 of the Income Tax Act:
The petitioner challenged the Notice dated 31st March 2022 under Section 148, arguing that it was issued without proper approval under Section 151 and without considering the petitioner’s detailed reply. The court observed that the reassessment was sought merely for verification, and the Assessing Officer should have conducted an enquiry as per Section 148A(a) and thoroughly scrutinized the petitioner’s submissions before passing the order under Section 148A(d).

4. Approval under Section 151 of the Income Tax Act:
The petitioner contended that the approval under Section 151 was taken only for passing the order under Section 148A(d) and not for issuing the notice under Section 148. The approval granted was alleged to be mechanical and without application of mind. The court noted that the impugned order was passed after receiving the petitioner’s detailed reply, and the Assessing Officer’s failure to consider this reply violated Section 148A(c), which mandates considering the petitioner’s response before making an order under Section 148A(d).

Court’s Observations and Directions:
The court found that the impugned notice and order were cryptic and lacked specific details about the transactions and the points requiring clarification. The reassessment seemed to be initiated merely for verification, and the Assessing Officer failed to conduct a proper enquiry or consider the petitioner’s detailed reply. The court quashed the impugned order and notice and remanded the matter back to the Assessing Officer for fresh determination. The Assessing Officer was directed to pass a fresh reasoned order under Section 148A(d) after considering the petitioner’s detailed reply within eight weeks. The court clarified that it had not commented on the merits of the controversy, leaving the rights and contentions of all parties open.