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2022 (8) TMI 1140 - HC - Income TaxReopening of assessment u/s 147 - purpose of conducting an enquiry under Clause (a) of Section 148 (A) of the Act or is it the information based on which the notice under Clause (b) of Section 148 of the Act was issued - Violation of principles of natural justice - whether the allegation contained in the annexure and the questions posed therein is for the purpose of conducting an enquiry under Clause (a) of Section 148 (A) of the Act or is it the information based on which the notice under Clause (b) of Section 148 of the Act was issued? - HELD THAT - We are fully satisfied that there has been gross violation of the principles of natural justice and the assessee did not have adequate opportunity to put forth their objection in an effective manner as the information sought for by the assessee was not furnished. Further we have held that the notices dated 21.03.2022 and 30.03.2022 though purported to have been issued under Clause (b) of Section 148A, on a reading of the annexure, it is clearly seen that the annexure does not contain information but it is a questionnaire. If that is so, then it goes without saying that what was intended by the assessing officer is to conduct an enquiry after receiving information from the assessee and the notice is deemed to be a notice under Section 148A (a) of the Act. Thus, there is gross procedural error from the very inception of the proceedings rendering the same as bad in law. In the result, the appeal is allowed, the order passed in the writ petition is set aside. Consequently, the writ petition is allowed to the extent indicated - (i) The order under Clause (d) of Section 148A of the Act dated 12.04.2022 is set aside and the matter is remanded to the assessing officer. (ii) For the reasons mentioned above, the notices dated 21.03.2022 and 31.03.2022 though stated to have been issued under Clause (b) of Section 148A of the Act, they are in fact, notices under Clause (a) of Section 148A of the Act and be treated as such, and accordingly direction is issued to the assessing officer to conduct an enquiry after receipt of the explanation from the assessee. (iii) The assessing officer, before conducting enquiry as directed in Clause (ii) above, is directed to furnish full information as sought for by the assessee by their representation dated 30/31.03.2022 within 15 days from the date of the receipt of the server copy of this order. (iv) On receipt of the such information, the assessee is granted 10 days time to submit their written response/reply after which the assessing officer shall proceed to conduct an enquiry as provided for under Clause (a) under Section 148 A of the Act and thereafter proceed in accordance with law. (v) In the light of the above directions, the notice issued under Section 148 of the Act dated 12.04.2022 cannot be enforced.
Issues Involved:
1. Validity of notices issued under Section 148A(b) of the Income Tax Act, 1961. 2. Alleged procedural irregularities and violation of principles of natural justice. 3. Requirement for disclosing information and materials to the assessee. 4. Compliance with the Supreme Court's decision in Union of India & Ors. vs. Ashish Agarwal. 5. Approval from the competent authority for issuing notices. Detailed Analysis: 1. Validity of Notices Issued Under Section 148A(b): The appellant argued that the notices dated 21.03.2022 and 30.03.2022 were not issued under Section 148A(b) but were initial enquiry notices under Section 148A(a). The notices did not disclose any reasons or materials suggesting that the assessee's income had escaped assessment. The court agreed, stating that the notices, though purportedly issued under Clause (b), were in fact notices under Clause (a) as they contained a questionnaire rather than information. This fundamental error vitiated the entire proceedings. 2. Alleged Procedural Irregularities and Violation of Principles of Natural Justice: The appellant contended that the Assessing Officer did not disclose the information/materials relied upon for issuing the notices, thus violating principles of natural justice. The court noted that the Assessing Officer neither provided the requested information nor responded to the appellant's requests. This failure constituted a gross violation of natural justice, as the appellant was not given a fair opportunity to respond effectively. 3. Requirement for Disclosing Information and Materials to the Assessee: The appellant consistently requested verbatim copies of the information suggesting income escapement, adverse materials, and the approval of the specified authority. The court held that the Assessing Officer should have either provided the requested information or explained why it could not be furnished. The absence of such disclosure rendered the proceedings unfair and in violation of natural justice principles. 4. Compliance with the Supreme Court's Decision in Union of India & Ors. vs. Ashish Agarwal: The appellant argued that the procedure stipulated under Section 148A, as elaborated in the Supreme Court's decision in Ashish Agarwal, was not followed. The court observed that the Assessing Officer failed to comply with the Supreme Court's directions and the CBDT's instructions dated 11.05.2022, which required providing the assessee with the information and materials relied upon. This non-compliance further invalidated the proceedings. 5. Approval from the Competent Authority for Issuing Notices: The appellant questioned the legality and validity of the approvals granted by the competent authority for issuing the notices. The court referred to the Supreme Court's decisions in Chhugamal Rajpal and Johri Lal (HUF), emphasizing the importance of independent decision-making by the approving authority. The court found that the Assessing Officer's actions lacked transparency and proper approval, further undermining the proceedings. Conclusion: The court allowed the appeal, set aside the order under Clause (d) of Section 148A dated 12.04.2022, and remanded the matter to the Assessing Officer. The notices dated 21.03.2022 and 30.03.2022 were deemed to be issued under Clause (a) of Section 148A, and the Assessing Officer was directed to conduct an enquiry after providing the requested information to the assessee. The notice under Section 148 dated 12.04.2022 was deemed unenforceable.
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