2022 (8) TMI 39 - HC - Income Tax

Reopening of assessment u/s 147 - denial of natural justice - order passed under Section 148A(d) - as argued non - compliance of the request to provide the complete information about the insight portal report based on which the notice under Section 148A(b) - HELD THAT - On going through the order dated 13th April, 2022 impugned in the writ petition, we find that none of the aspects have been adhered to by the assessing officer. The assessing officer no doubt has referred to the assessee s reply dated 9th April, 2022 but there is no discussion as to the objection raised by the assessee in their reply. There is no discussion on the documents, which were placed by the assessee along with the reply with soft copies uploaded in the e-proceeding. Though the assessing officer states that in the light of the discussion and material available on record he was of the opinion that income chargeable to tax has escaped assessment , there is no discussion on any of the materials, which were placed by the assessee along with the reply dated 9th April, 2022. Thus, it can be safely held that the order dated 13th April, 2022 passed under Section 148A(d) of the Act is not sustainable and liable to be set aside. The legal principle that can be culled out from the aforementioned decisions is that the opportunity which is provided for under the scheme of the Act should be a meaningful and effective opportunity as such opportunity is not an empty formality. The assessee is entitled to be heard and such hearing should be a purposeful and effective hearing and not for the sake of showing as if a hearing was conducted. All the aforementioned decisions and the law which has been pointed out therein will fully enure in favour of the appellant consequently to hold that the order passed by the assessing officer dated 13th April, 2022 under Section 148A(d) of the Act would call for an interference. The appeal is allowed and the connected application (I.A. No. CAN 2 of 2022) is disposed of. The order passed in the writ petition is set aside. Consequently, the writ petition is allowed and the order dated 13th April, 2022 passed under Section 148A(d) of the Act is quashed and the matter is remanded to the assessing officer for fresh consideration.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Validity of the reassessment proceedings under Section 148A of the Income Tax Act, 1961.
3. Alleged procedural irregularities and violation of principles of natural justice.
4. Adequacy of the information provided to the assessee.
5. Requirement of a reasoned order by the assessing officer.

Detailed Analysis:

Condonation of Delay:
1. The application to condone the delay of 15 days in filing the appeal was considered. The Court, after hearing both parties, was satisfied with the reasons provided in the affidavit supporting the application. Consequently, the delay in filing the appeal was condoned, and the application (I.A. CAN 1 of 2022) was allowed.

Validity of Reassessment Proceedings:
2. The intra-Court appeal challenged the order dated 23rd May 2022, which dismissed the writ petition against the reassessment order dated 13th April 2022 under Section 148A(d) of the Income Tax Act, 1961. The writ petitioner (assessee) contended that the reassessment proceedings were initiated based on incorrect information and without proper consideration of their response.

Procedural Irregularities and Natural Justice:
3. The Court noted that the assessee was issued a notice under Section 148A(b) on 22nd March 2022, requiring a response by 29th March 2022. The assessee requested an adjournment, and the deadline was extended to 12th April 2022. The assessee submitted a reply on 9th April 2022, disputing the information and providing supporting documents. The Court found that the assessing officer failed to provide the complete information from the insight portal and did not consider the assessee's objections and documents adequately, thereby violating principles of natural justice.

Adequacy of Information Provided:
4. The Court emphasized that the assessing officer should have provided the information based on which the notice under Section 148A(b) was issued. The failure to do so constituted a serious procedural error. The assessee had contested the accuracy of the information, stating that the transactions mentioned did not match their records. The Court held that the assessing officer should have furnished the insight portal information and given the assessee an opportunity to respond further.

Requirement of a Reasoned Order:
5. The Court observed that the order dated 13th April 2022 lacked a detailed discussion on the assessee's objections and the documents submitted. The order merely stated that income chargeable to tax had escaped assessment without addressing the specific contentions raised by the assessee. The Court highlighted the necessity for a reasoned order, referencing decisions from higher courts that mandate a detailed explanation when rejecting an assessee's reply.

Conclusion:
6. The Court concluded that the order dated 13th April 2022 under Section 148A(d) was unsustainable and set it aside. The matter was remanded to the assessing officer for fresh consideration, directing the officer to provide the complete insight portal information to the assessee and allow seven days for further response. The assessee should be granted a hearing, either physical or virtual, and a reasoned order should be passed thereafter. The notice issued under Section 148 dated 13th April 2022 was not to be enforced until this process was completed.

Final Orders:
7. The appeal was allowed, the writ petition was granted, and the order dated 13th April 2022 was quashed. The assessing officer was instructed to follow the outlined procedure to ensure compliance with natural justice and provide a reasoned decision based on the merits of the case. No costs were awarded, and urgent certified copies of the order were to be furnished upon compliance with legal formalities.