2022 (12) TMI 546 - HC - Income Tax

Reopening of assessment u/s 147 - notice issued u/s 148A(b) of the Act are on distinct and separate grounds and party name - HELD THAT - This Court is of the view that the Kingsway Camp property was mentioned in the notice issued u/s 148A(b) and the petitioner was never asked to explain the transaction with regard to the sale of the Rohini property. This Court finds that not only is the description of the property different in the notice issued u/s 148A(b) of the Act and the order passed u/s 148A(d) of the Act, but also the sale consideration and circle rate in both the documents are different. It seems to this Court that though the AO prior to passing the impugned order under Section 148A(d) realised that he had committed a mistake while issuing the notice u/s 148A(b) yet he proceeded with the same and even went to the extent of wrongly stating in the Section 148A(d) order that he had issued the notice under Section 148A(b) of the Act with regard to the Rohini property instead of Kingsway Camp property. A perusal of the file also reveals that the information with the Assessing Officer received from the ITO, Ward 35(1), Delhi was with regard to violation of Section 269SS and not with regard to non-declaration of long term capital gain, for which the notice had been issued. Consequently, the impugned show cause notice is contrary to the record. As settled law that the intent behind issuing the notice u/s 148A(b) is to inform the assessee of the allegations against him/her with sufficient particulars so that he/she can put forward his/her defence. In the present instance, the assessee specifically replied to the allegation that was mentioned in the notice issued under Section 148A(b) and for this, she cannot be faulted with. AO has been negligent in incorporating the incorrect information and in not admitting the fact that he had committed a mistake while issuing a notice under Section 148A(b) of the Act even at the time of passing the order u/s 148A(d) of the Act. Present writ petition is allowed and the show cause notice issued under Section 148A(b) of the Act as well as the order passed u/s 148A(d) and the notice issued under Section 148 for the Assessment Year 2017-18 are set aside.

Summary

Issues Involved:
Challenging notice under Section 148 of the Income Tax Act, 1961; order passed under Section 148A(d) of the Act; Notice under Section 148A(b) of the Act; Barred by limitation under Section 149(1)(b) of the Act.

Challenging Notice under Section 148 of the Income Tax Act, 1961:
The petitioner filed a writ petition challenging the notice issued under Section 148 of the Income Tax Act, 1961, dated 25th June, 2021, along with subsequent notices and orders for the Assessment Year 2017-18. The petitioner contended that the order passed under Section 148A(d) of the Act and the notice issued under Section 148A(b) of the Act were based on distinct grounds. The petitioner argued that the impugned proceedings were time-barred under Section 149(1)(b) of the Act as the alleged income that escaped assessment was less than the threshold amount of Rs. 50,00,000. The court noted discrepancies in the descriptions, sale considerations, and circle rates of the properties mentioned in the notices and orders, highlighting a mistake in the proceedings initiated by the Assessing Officer.

Order Passed under Section 148A(d) of the Act:
The court observed that the Assessing Officer had erroneously proceeded with the notice under Section 148A(b) of the Act, despite realizing the mistake in the description of the property. The court found that the information provided to the Assessing Officer was related to a different violation under the Act, not the non-declaration of long-term capital gains as alleged in the notice. Referring to a previous judgment, the court emphasized that foundational allegations missing in the notice could not be rectified through a supplementary notice. It was highlighted that the purpose of issuing the notice was to inform the assessee of the allegations with sufficient particulars for a defense. The court concluded that the petitioner had responded to the allegations in the notice adequately, while the Assessing Officer had been negligent in incorporating incorrect information.

Notice under Section 148A(b) of the Act:
The court noted discrepancies between the properties mentioned in the notice under Section 148A(b) of the Act and the subsequent order under Section 148A(d) of the Act. It was highlighted that the Assessing Officer had committed a mistake in issuing the notice and failed to rectify it during the proceedings. The court emphasized that the impugned show cause notice was contrary to the record, as the information received was different from the allegations made in the notice. Citing settled law, the court held that the notice must contain accurate and specific allegations to enable the assessee to respond adequately. Consequently, the court set aside the show cause notice issued under Section 148A(b) of the Act, along with the order passed under Section 148A(d) of the Act and the notice issued under Section 148 of the Act for the Assessment Year 2017-18.

Barred by Limitation under Section 149(1)(b) of the Act:
The court addressed the issue of the proceedings being barred by limitation under Section 149(1)(b) of the Act due to the alleged escaped income being less than the prescribed threshold. It was noted that the proceedings could only be initiated after three years from the end of the relevant assessment year if the amount alleged to have escaped assessment was Rs. 50,00,000 or more. The court considered this aspect in conjunction with the discrepancies and mistakes in the notices and orders, ultimately setting aside the impugned proceedings for the Assessment Year 2017-18.

In conclusion, the High Court allowed the writ petition, setting aside the show cause notice issued under Section 148A(b) of the Act, the order passed under Section 148A(d) of the Act, and the notice issued under Section 148 of the Act for the Assessment Year 2017-18. The court granted liberty to the respondents-revenue to take further steps in accordance with the law, with the petitioner retaining the right to seek remedies if necessary.