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2022 (9) TMI 105 - HC - Income TaxReopening of assessment u/s 147 - new notice issued rather than orders to be passed u/s 148A(d) - validity of the AO s action in issuing the notice dated 23rd June 2022 - Whether contents of notice dated 23rd June, 2022 is distinct from the reasons to believe dated 27th March, 2021? - In the notice dated 23rd June 2022, the AO sought an explanation from the petitioner for receipt on an amount from an entity namely M/s Subhshree Financial Management Pvt. Ltd. during the relevant Financial Year - HELD THAT - We are unable to accept the contention of learned counsel for the petitioner that the AO was precluded from providing the information set out in the notice dated 23rd June, 2022. In the impugned order, the AO has noted that information contained in the notice dated 23rd June, 2022 was provided to the petitioner upon her request for further material as per her reply dated 23rd May, 2022. The impugned order specifically identifies that the transaction of the petitioner with M/s Subhshree Financial Management Pvt. Ltd. dated 10th August, 2012 is subject matter of notices. In the facts of the present case as well, the petitioner in her reply dated 24th May, 2022, had while highlighting that the assertions of the AO in the notice dated 17th May, 2022 were vague had specifically sought better material and information from AO to enable a rebuttal. The issuance of notice dated 23rd June, 2022 furnishing specific details of the transaction, which as per AO is subject matter of the notice dated 17th May, 2022 cannot be faulted. A perusal of the notice dated 23rdJune, 2022 and impugned order dated 22nd July, 2022 shows that as per the AO the details of the transaction which form the basis of the notices dated 19th April, 2021 and 23rd June, 2021 are same. It is the case of the respondent that the said material was available on record and the said form the basis of the inquiry, when the initial notice dated 19th April, 2021 was issued. Pertinently, the petitioner has not offered any explanation for the transaction(s) entered with M/s Subhshree Financial Management Pvt. Ltd. Limited in the relevant financial year in her reply dated 27th June, 2022. In the absence of any explanation offered in her reply, we do not find any error in the impugned order issued by the AO. We also do not agree with the contention of the petitioner that she was denied an opportunity to respond to the allegations made in the notice dated 23rd June, 2022. Petitioner filed a detailed reply on 28th June, 2022 but elected not to explain or substantiate the transaction between the petitioner and M/s Subhshree Financial Management Pvt. Ltd. The petitioner having elected to not furnish the said information cannot contend that she was denied an opportunity of hearing. The petitioner does not dispute that there were transactions between petitioner and M/s Subhshree Financial Management Pvt. Ltd. in the relevant Financial Year. Petitioner s contention in the writ petition that this transaction was a loan transaction and it stood repaid, the same is a bare averment, unsubstantiated and it is neither evident from the record nor can this fact be determined in these proceedings, when the allegation of the Department is that it was an accommodation entry. The said submission of the petitioner will be examined by the AO in the assessment proceedings after perusing the material furnished by the petitioner. The reply dated 27th June, 2022 offered no such explanation, much less the above explanation for the transaction. This Court finds no infirmity in the impugned order passed by the AO. Accordingly, the present writ petition and application are dismissed.
Issues Involved:
1. Validity of the notice issued under Section 148A(b) of the Income Tax Act, 1961. 2. Compliance with the mandatory procedure under Section 148A of the Act. 3. Timeliness and legality of the notice dated 23rd June, 2022. 4. Legitimacy of the transaction between the petitioner and M/s Subhshree Financial Management Pvt. Ltd. 5. Interpretation of the term 'asset' under Section 149(1)(b) of the Act. 6. Whether the CBDT Instruction No. 01/2022 is ultra vires. Detailed Analysis: 1. Validity of the Notice Issued Under Section 148A(b): The petitioner received a notice dated 19th April 2021 under Section 148 of the Income Tax Act, 1961, initiating reassessment proceedings for AY 2013-14. The petitioner challenged this notice, and it was quashed by the court, following the judgment in Mon Mohan Kohli vs. Assistant Commissioner of Income Tax & Anr. However, based on the Supreme Court's judgment in Union of India & Ors. vs. Ashish Agarwal, the petitioner was served another notice on 17th May 2022, which provided the reasons for reopening the assessment. 2. Compliance with the Mandatory Procedure Under Section 148A: The petitioner argued that the notice dated 19th April 2021 was issued without following the mandatory procedure under Section 148A. The court had earlier quashed this notice, and a new notice was issued on 17th May 2022, providing the necessary information and material relied upon by the AO. The petitioner responded with a detailed reply, denying the financial transactions alleged. 3. Timeliness and Legality of the Notice Dated 23rd June 2022: The petitioner contended that the AO could not have issued the notice dated 23rd June 2022, as it was beyond the permissible period and introduced new facts. The court, however, found that the AO issued the notice in response to the petitioner's request for better particulars. The court held that the AO was not precluded from providing additional information on 23rd June 2022, as it was necessary for the petitioner to provide a meaningful response. 4. Legitimacy of the Transaction Between the Petitioner and M/s Subhshree Financial Management Pvt. Ltd.: The AO's notice dated 23rd June 2022 sought an explanation for a transaction of Rs. 50,00,000/- with M/s Subhshree Financial Management Pvt. Ltd. The petitioner replied, denying the transaction and asserting that no specific date or material was provided to support the allegation. The court noted that the petitioner did not offer any explanation for the transaction in her reply dated 27th June 2022, and thus, found no error in the AO's impugned order. 5. Interpretation of the Term 'Asset' Under Section 149(1)(b): The petitioner argued that the credit of Rs. 50,00,000/- was not an 'asset' within the meaning of Section 149(1)(b). The respondent countered that the term 'asset' includes deposits in the bank account, and thus, the transaction was covered under this provision. The court did not find the petitioner's argument persuasive and held that the transaction was subject to assessment. 6. Whether the CBDT Instruction No. 01/2022 is Ultra Vires: The petitioner did not address arguments on the challenge to the CBDT Instruction No. 01/2022, and the court did not examine this issue. Conclusion: The court dismissed the writ petition and application, finding no infirmity in the AO's impugned order. The court emphasized that the AO was justified in issuing the notice dated 23rd June 2022, as it was in response to the petitioner's request for specific material. The court also noted that the petitioner failed to provide a satisfactory explanation for the transaction with M/s Subhshree Financial Management Pvt. Ltd. The court clarified that it did not express any opinion on the merits of the controversy, leaving all rights and contentions of the petitioner open for assessment proceedings.
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