2023 (1) TMI 95 - HC - Income Tax

Validity of reopening of assessment - denial of principles of natural justice - non-supply of relevant material - Whether the impugned order u/s 148A(d) passed by the 2nd respondent is bad in law for non-supply of relevant material to the petitioner/assessee along with notice u/s 148A(b)? - HELD THAT - As per Section 148A(b) reading there is an avowed object in it, as it is intended to provide an opportunity of being heard to the assessee before proceeding u/s 148. Issuance of show cause notice shall not be treated as a mere formality. It should be accompanied with the relevant material so as to put the concern assessee in notification as to the ground on which the assessing authority is proposing to proceed for re-assessment. If the assessee is deprived of the relevant material he will not be in a position to submit a comprehensive and befitting reply to the show cause notice. Therefore, non-supply of relevant material, as stated supra, would amount to denial of principles of natural justice. The writ petition is allowed and the impugned order dated 31.03.2022 passed by the Respondent No.2 under Section 148A(d) is set aside with a direction to the said authority to furnish the relevant material which prompted to initiate reassessment proceedings to the petitioner within two weeks from the date of receipt of copy of this order and thereupon the petitioner shall submit his reply along with relevant material to the said authority within two weeks from the date of receipt of the material and thereupon the 2nd respondent shall consider the reply and the material if any, submitted by the petitioner and after affording an opportunity of hearing to the petitioner, pass an appropriate order u/s 148A(d) of the IT Act.

Summary

Issues Involved:
1. Legality of the order passed under Section 148A(d) of the Income Tax Act, 1961.
2. Alleged violation of principles of natural justice due to non-supply of relevant material to the petitioner.

Issue-wise Detailed Analysis:

1. Legality of the order passed under Section 148A(d) of the Income Tax Act, 1961:

The petitioner challenged the order dated 31.03.2022 issued under Section 148A(d) of the Income Tax Act, 1961, claiming it was illegal and arbitrary. The petitioner argued that the show cause notice issued under Section 148A(b) did not include the material/loose sheets of papers relied upon by the Respondent No.2, which is a requirement under the statute. The petitioner asserted that without these documents, the show cause notice did not meet the statutory requirements, making the order under Section 148A(d) invalid.

The respondents contended that a survey under Section 133A of the IT Act was conducted, revealing unaccounted debtors of Rs.11.42 Crores, leading to the issuance of the show cause notice under Section 148A(b). They argued that the order under Section 148A(d) was passed with the prior approval of the Principal Commissioner of Income Tax, making it lawful and not arbitrary.

2. Alleged violation of principles of natural justice due to non-supply of relevant material to the petitioner:

The petitioner claimed that the relevant material (impounded loose sheets) was not provided, which was crucial for submitting a comprehensive reply to the show cause notice. The petitioner requested these documents multiple times but did not receive them, leading to a violation of principles of natural justice.

The respondents argued that the impounded material was provided to the petitioner's Authorized Representative via WhatsApp. However, during the hearing, the petitioner's counsel denied receiving any such material, and the respondents failed to provide proof of delivery.

The court emphasized that non-furnishment of relevant material amounts to a violation of principles of natural justice. Section 148A(b) mandates providing an opportunity of being heard to the assessee, which includes supplying the relevant material. Without these documents, the petitioner could not submit an effective reply, thus violating the principles of natural justice.

Judgment:

The court held that the relevant material was not furnished to the petitioner, violating the principles of natural justice. The impugned order dated 31.03.2022 under Section 148A(d) was set aside. The court directed Respondent No.2 to provide the relevant material to the petitioner within two weeks. The petitioner was then to submit a reply within two weeks of receiving the material, and Respondent No.2 was to consider the reply and pass an appropriate order after affording an opportunity of hearing to the petitioner. No costs were imposed, and any pending interlocutory applications were closed.