2022 (8) TMI 92 - HC - Income Tax

Reopening of assessment u/s 147 - whether the writ petition challenging the order passed u/s 148A (d) and notice issued u/s 148 is maintainable or not? - HELD THAT - Complete mechanism for determination of escape amount has been provided under the statute and the Assessing Authority, in the present case, while considering the submissions, reply made by the petitioner, has applied its mind and passed the impugned order u/s 148A(d) - In fact, in the present writ petition, the petitioner has raised grounds denying the fact that the petitioner did not enter into any purchase or sale transaction with M/s Panveer Trading Private Limited and he has also not claimed any input tax credit with respect to goods and service tax purportedly paid by M/s Panveer Trading Private Limited and he has also not entered any transaction with M/s Panveer Trading Company, as such there is no question of escapement of income chargeable to tax by making claim of bogus expenditure in terms of bogus purchases. These facts are his defence which can be examined while conducting proceeding under Section 148A. The grounds which have been taken by the petitioner in the writ petition is his defence that cannot be examined at the stage of issuance of notice under section 148 as the Assessing Authority before issuance of notice under Section 148 of the Act, 1961 has to rely upon credible information which in the impugned order under Section 148A (d) of the Act, 1961 has already been furnished and thereafter, considering the material it has recorded a finding that it is a fit case where notice under Section 148 of the Act, 1961 can be issued. Petitioner is unable to point out that the findings which have been recorded by the Assessing Authority are contrary to the material on record and the Assessing Authority has not applied its mind or Assessing Authority has not considered the reply filed by the petitioner. Therefore, the writ petition, at this juncture is not maintainable and deserves to be dismissed. Writ petition being devoid of merit is liable to be and is hereby dismissed

Summary

Issues Involved:
1. Quashment of the order under Clause (d) of Section 148A of the Income Tax Act, 1961.
2. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
3. Maintainability of the writ petition under Article 226 of the Constitution of India.

Detailed Analysis:

1. Quashment of the order under Clause (d) of Section 148A of the Income Tax Act, 1961:
The petitioner, a domestic company engaged in civil construction, challenged the order passed under Clause (d) of Section 148A of the Income Tax Act, 1961. The petitioner argued that the Assessing Authority issued the order without considering the material and reply provided by the petitioner. The Assessing Authority, however, had credible information from the Investigation Wing, Kolkata, indicating that the petitioner had transactions with M/s Panveer Trading Private Limited, which was involved in generating and selling fake tax invoices. The Assessing Authority concluded that income chargeable to tax amounting to Rs. 2,20,00,275/- had escaped assessment.

2. Validity of the notice issued under Section 148 of the Income Tax Act, 1961:
The petitioner contended that the notice under Section 148 was issued mechanically without application of mind. The Assessing Authority, however, followed the procedure outlined in Section 148A, which includes conducting an inquiry, providing an opportunity of being heard, and considering the reply of the assessee. The Supreme Court in Union of India vs. Ashish Agrawal emphasized that the new provisions under Section 148A are remedial and benevolent, providing safeguards before issuing a notice under Section 148. The Assessing Authority had credible information and followed the due process, making it a fit case for issuing the notice under Section 148.

3. Maintainability of the writ petition under Article 226 of the Constitution of India:
The court examined whether the writ petition challenging the order under Section 148A(d) and the notice under Section 148 was maintainable. The court referred to precedents, including the judgments of the High Court of Madras and the High Court of Delhi, which held that the proper course of action for the assessee is to file a return and seek reasons for issuing the notice. The court emphasized that the grounds raised by the petitioner were defenses that could be examined during the proceedings under Section 148A. The court concluded that the writ petition was premature and not maintainable at this stage, as the petitioner had alternative remedies available under the Income Tax Act.

Conclusion:
The court dismissed the writ petition, stating that the petitioner's defenses could be examined during the proceedings under Section 148A. The court did not delve into the merits of the petitioner's contentions but focused on the maintainability of the writ petition. The Assessing Authority followed the due process under Section 148A, and the issuance of the notice under Section 148 was based on credible information. The petitioner was advised to pursue the alternative remedies available under the Income Tax Act.