2022 (6) TMI 900 - HC - Income Tax

Reopening of assessment u/s 147 - validity of notice issued u/s 148A - Non considering reply furnished by appellant - HELD THAT - As the impugned order under Section 148A(d) of the Act has been passed in great haste and in gross violation of principle of natural justice as the Petitioner was not given reasonable time to file a reply. In any event, as the impugned order under Section 148A(d) of the Act had been passed on 29th March, 2022 i.e. after receipt of the detailed reply by the Petitioner dated 24th March, 2022, the Assessing Officer should have considered the same as it was available on record. By not considering the reply of the Petitioner dated 24th March, 2022, the mandate of Section 148A(c) 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) before making an order under Section 148A(d) of the Act. This Court in Fena Pvt. Ltd. 2022 (5) TMI 892 - DELHI HIGH COURT had quashed the order passed under Section 148A(d) of the Act in similar circumstances i.e. where the Assessing Officer had not taken into consideration the reply along with the documents/evidences filed by the assessee before passing the order under Section 148A(d). - Decided in favour of assessee.

Summary

Issues:
Challenge to order under Section 148A(d) of the Income Tax Act, 1961 and related proceedings, violation of principle of natural justice, failure to consider detailed reply of the Petitioner, quashing of impugned order and notice, remand to Assessing Officer.

Analysis:

1. The Petitioner filed a writ petition challenging the order dated 29th March, 2022 passed by the Respondent under Section 148A(d) of the Income Tax Act, 1961, along with the related proceedings and the notice dated 04th April, 2022 issued under Section 148 of the Act for the Assessment Year 2018-19. The Petitioner sought a direction to restrain the Respondents from taking any steps based on the said order and notice.

2. The Petitioner's counsel argued that the Respondent issued a show cause notice alleging a significant capital investment by the Petitioner without providing the minimum stipulated time for a reply as per Section 148A of the Act. Despite the Petitioner filing a detailed reply demonstrating the legitimacy of the investment, the subsequent order passed on 29th March, 2022 merely reiterated the initial allegations without considering the Petitioner's response adequately.

3. The Respondent contended that income had escaped assessment, relying on the order passed under Section 148A(d) of the Act, which highlighted the omission of Rs.85,85,500/- from the Petitioner's ITR for the relevant assessment year.

4. The Court observed that the impugned order was hastily passed, violating the principles of natural justice by not allowing the Petitioner sufficient time to respond. Additionally, the Assessing Officer failed to consider the detailed reply submitted by the Petitioner before passing the order, which was a violation of Section 148A(c) that mandates the consideration of the assessee's response before making a decision under Section 148A(d) of the Act. The Court referenced a previous case where a similar oversight led to the order being quashed.

5. Consequently, the Court quashed the impugned order under Section 148A(d) of the Act and the notice under Section 148, remanding the matter back to the Assessing Officer with directions to decide the notice under Section 148A(b) by issuing a reasoned order in compliance with the law, taking into account the Petitioner's reply. The writ petition and pending applications were disposed of in light of these directions.