2022 (10) TMI 235 - HC - Income Tax

Reopening of assessment u/s 147 - validity of order passed u/s 148A(d) and the notice issued under Section 148 - as alleging that Petitioner had sold immovable property - as stated in the impugned order passed u/s148A(d) the Respondents while admitting the factual mistake stated that since the Petitioner already knew about the issue, he should have explained the source of the purchase of the property in its reply - HELD THAT - Revenue reiterates that though there was factual mistake in the notice issued u/s 148A(b) of the Act, yet as the petitioner knew the factual issue, he should have explained the source of purchase of property. After hearing learned counsel for the parties, this Court is of the view that there has been clear violation of principles of natural justice, inasmuch as, the respondent never asked the petitioner to explain the source of purchase of the property and passed the impugned order on the basis that petitioner did not explain the source of the purchase. Consequently, the impugned order passed u/s 148A(d) and notice issued under Section 148 dated 17th and 18th July, 2022 of the Act are set aside and the respondent is given liberty to issue a corrigendum and a supplementary show cause notice under Section 148A(b) within two weeks. Thereafter, the petitioner is given liberty to file a reply to the notice issued under Section 148A treating the transaction of sale as a transaction of purchase within four weeks. The petitioner in its reply shall also explain the source of fund for purchase of property. The Assessing Officer shall pass the order under Section 148A(d) of the Act in accordance with law.

Summary

Issues involved:
Challenging order under Section 148A(d) of the Income Tax Act, 1961 and notice issued under Section 148 for Assessment Year 2016-17.

Analysis:
The petitioner challenged the order dated 17th July, 2022, passed under Section 148A(d) of the Income Tax Act, 1961, and the notice dated 18th July, 2022, issued under Section 148 for the Assessment Year 2016-17. The petitioner had been issued a letter alleging the sale of immovable property, to which they responded that no property was sold but one was registered in their favor. The impugned order admitted a factual mistake but proceeded on the basis that the petitioner did not explain the source of purchase. The respondents initiated reassessment proceedings on this ground without explicitly asking the petitioner to explain the source of purchase.

The court noted a clear violation of principles of natural justice as the respondent never asked the petitioner to explain the source of purchase before passing the impugned order. Consequently, the court set aside the impugned order passed under Section 148A(d) and the notice issued under Section 148, giving the respondent liberty to issue a corrigendum and a supplementary show cause notice within two weeks. The petitioner was granted four weeks to file a reply treating the transaction of sale as a transaction of purchase, along with explaining the source of funds for the property purchase. The Assessing Officer was directed to pass the order under Section 148A(d) in accordance with the law.

In conclusion, the court disposed of the writ petition and applications with the aforementioned directions and liberty granted to the parties for further proceedings.