2022 (8) TMI 916 - HC - Income Tax

Reopening of assessment u/s 147 - breach of the statutory mandate of Section 148-A (c) - multiple transactions such as cash deposits, payments to contractors etc. and has not filed any return of income for the relevant assessment year - HELD THAT - In the present case, the significance of issuance of a show cause notice at a stage prior to issuance of a re-assessment notice u/s 148 of the Act has been lost on the respondents inasmuch as the impugned order u/s 148A(d) has been passed without considering the detailed reply filed by the petitioner dated 03rd April, 2022. It is pertinent to mention that though the impugned order notes that the Citizen Model School is being run by the petitioner-society, yet it goes on to hold that income had escaped assessment as no return of income had been filed by the school without dealing with the contention of the petitioner-society that all the financial transactions of the school had been accounted for in its return of income. The judgment of the Gujarat High Court in Sardar Vallabhbhai Patel Education Society 2022 (5) TMI 1159 - GUJARAT HIGH COURT is squarely applicable to the facts of the present case. In Gian Castings Private Limited 2022 (6) TMI 246 - PUNJAB HARYANA HIGH COURT the facts which were in controversy have not been set out and therefore it is not possible to assume that there is any similarity with the facts in the present proceedings. The said judgment merely records that the merits of the order passed u/s 148 were under challenge. The challenge before us as noted above is not to the merits of the order but to the breach of the statutory mandate of Section 148-A (c) of the Act, which error is evident on the face of the record. Accordingly, the judgment of the Punjab Haryana High Court in Gian Castings Private Limited (supra) offers no assistance to the respondents. Consequently, as the respondents-revenue have not examined the petitioner s plea that the petitioner-society has included all the transactions carried out by the Citizen Model School in its books of accounts, the impugned order passed on the ground that the case of the petitioner-society was of non-filing of return is set aside and the matter is remanded back to the Assessing Officer to pass a fresh order u/s 148A(d) of the Act in accordance with law within eight weeks.

Summary

Issues:
Challenging order under Section 148A(d) of the Income Tax Act, 1961 and notice issued under Section 148 for AY 2018-19.

Analysis:

1. Petitioner's Submissions:
The petitioner challenged the order and notice issued to Citizen Model School, disclosing annual receipts. The petitioner argued that all financial transactions were duly accounted for in the return of income. Citing a Gujarat High Court case, the petitioner contended that the school is part of the petitioner-society and cannot be treated as a separate entity for assessment purposes.

2. Respondents' Submissions:
The Revenue argued that the petition was premature as only a notice had been issued. Referring to a Punjab and Haryana High Court judgment, they emphasized that interference at a premature stage should be avoided. The Revenue also highlighted the complexity of correlating cash deposits with the return filed by the petitioner-society.

3. Court's Reasoning on New Re-assessment Scheme:
The Court discussed a previous judgment emphasizing the intent of the new re-assessment scheme to reduce litigation and promote ease of doing business. It noted that breaching the mandate of Section 148A(c) occurs if the reply filed by the assessee is not considered in the order under Section 148A(d).

4. Impugned Order Analysis:
The Court found that the impugned order failed to consider the detailed reply filed by the petitioner, which accounted for all financial transactions. It was noted that the school's aggregate annual receipts were higher than mentioned in the notice. The Court applied the Gujarat High Court judgment and concluded that the error was in breaching the statutory mandate of the Act.

5. Relief Granted:
As the Revenue did not examine the petitioner's plea regarding the inclusion of all school transactions in the books of accounts, the order was set aside. The matter was remanded back to the Assessing Officer for a fresh order within eight weeks, emphasizing the importance of following statutory mandates.

In conclusion, the Court allowed the writ petition, highlighting the necessity for proper consideration of all relevant submissions and compliance with statutory provisions in assessment proceedings under the Income Tax Act.