2022 (10) TMI 37 - HC - Income Tax

Reopening of assessment u/s 147 - validity of order passed by AO u/s 148A(d) - violation of natural justice - HELD THAT - Ultimately, the explanation offered by the assessee was rejected and notice u/s 148 of the Act was issued. In our considered view, the stand taken by the assessing officer to deny an opportunity of personal hearing is not tenable. If credible information is available with the department such information has to be disclosed to the assessee so as to afford them an effective opportunity of submitting a reply. Having not done so, the proceeding is in violation of principles of natural justice. During the course of submission appearing for the appellant submitted that notice issued under Section 148A(b) of the Act is barred by limitation. The learned Advocate was candid enough to state that such a ground was not raised by the assessee while their reply to the show-cause notice nor heard before the learned Single Bench. In any event, the limitation being a question of law and touching upon the jurisdiction of the authority to initiate proceedings, it could be raised at any stage of the proceedings and it will not preclude the assessee from doing so, even at the appellate state before us. As we are fully satisfied that there has been violation of natural justice we are inclined to set aside the order passed by the assessing officer under Section 148A(d) and restore the matter back to the file of the assessing officer with certain directions.

Summary

Issues:
Challenge against assessing officer's order under Section 148A(d) of the Income Tax Act, 1961 for the assessment year 2014-15 based on violation of principles of natural justice and procedural irregularity.

Analysis:
The appellant challenged an order passed by the assessing officer under Section 148A(d) of the Income Tax Act, 1961 for the assessment year 2014-15, primarily on grounds of violation of principles of natural justice and procedural irregularity. The Single Bench opined that the appellant could raise contentions in reassessment proceedings. The appellant, aggrieved by this decision, appealed to the High Court. The Court heard arguments from both sides and examined the facts of the case.

The assessing officer issued a notice under Section 148(A)(d) based on information received through the "insight portal" regarding significant transactions in the assessee's bank account. The appellant denied having an account with the specified bank branch and requested a personal hearing and cross-examination of relevant persons. However, the assessing officer proceeded to pass the order without granting a personal hearing, leading to the challenge by the appellant.

Upon reviewing the order and the appellant's reply, the Court found that the denial of a personal hearing by the assessing officer was not justifiable. The Court emphasized that if the department possessed credible information, it should disclose it to the assessee to allow for a proper response, failing which it would violate principles of natural justice.

During submissions, the appellant raised the issue of limitation regarding the notice issued under Section 148A(b) of the Act. The Court acknowledged that this ground was not previously raised but stated that it could be addressed at any stage of the proceedings. The Court, satisfied with the violation of natural justice, set aside the assessing officer's order and directed the matter back to the assessing officer with specific instructions.

The Court distinguished a Supreme Court decision cited by the respondent, emphasizing the procedural irregularities and violation of natural justice in the present case. Consequently, the Court allowed the appeal, set aside the order, and directed the assessing officer to provide a fair opportunity for the assessee to present their defense effectively.

In conclusion, the Court set aside the notice issued under Section 148A(d), restored the matter to the assessing officer, and directed a proper hearing, provision of relevant information, and consideration of the limitation issue. The Court clarified that no decision on merits was made, leaving it open for the assessee to raise all points before the assessing officer for a decision in accordance with the law.