2023 (1) TMI 486 - HC - Income Tax

Reopening of assessment u/s 147 - Period of limitation to issue notice issued under Section 148A(b) - HELD THAT - A careful perusal of the reply would show that it was a partial reply, and that taking into account the assertions raised therein, the AO via communication dated 16.06.2022 granted further time to the petitioner to submit a final response. Therefore, it is Mr Kumar s submission, that the period of one month would commence only from 30.06.2022, being end of the month i.e., the date on which the extended time to furnish the reply expired. Thus, accordingly, if this position is taken to be correct, the AO could pass an order u/s 148A(d) of the Act, on or before 31.07.2022. As observed above, we are in agreement with Mr Kumar on this aspect of the matter. To reiterate, since the reply of the petitioner was partial, and the petitioner itself had indicated that even if no material is supplied, it will file a further response to the notice issued under Section 148A(b) of the Act, the one-month timeframe would kick in only from 30.06.2022. Non-supply of the material - Insofar as this aspect is concerned, Mr Kumar, cannot but accept that in terms of the judgment of the Supreme Court rendered in Union of India v. Ashish Aggarwal 2022 (5) TMI 240 - SUPREME COURT underlying information/material which formed the basis for triggering the assessment/reassessment proceedings was required to be furnished to the petitioner. That being the position, according to us, the best way forward is to set aside the impugned order passed under Section 148A(d) of the Act and the consequential notice of even date i.e., 25.07.2022 issued under Section 148 of the Act. The matter is remitted to the AO.AO will furnish the underlying material concerning the petitioner, within three weeks of receipt of a copy of the judgement.

Summary

Issues involved:
1. Validity of the order dated 25.07.2022 under Section 148A(d) of the Income Tax Act, 1961 and the consequential notice issued under Section 148 concerning Assessment Year 2016-2017.
2. Timeliness of passing the order under Section 148A(d) of the Act.
3. Non-supply of material forming the basis for assessment/reassessment proceedings.

Analysis:

Issue 1: Validity of the order dated 25.07.2022
The writ petition challenged the order passed under Section 148A(d) of the Income Tax Act, 1961, and the consequential notice issued concerning Assessment Year 2016-2017. The assessing officer had identified unsecured loan transactions totaling Rs. 2.7 crores among three entities, suspecting them to be accommodation entries due to common directors, struck-off company names, and lack of response to summons. The petitioner sought information and material from the AO, indicating a willingness to respond further based on the provided details. However, the AO did not furnish the gathered information during the proceedings. The petitioner contended that the order should be set aside as it was passed after the prescribed time under Section 148A(d) had lapsed.

Issue 2: Timeliness of passing the order
The petitioner argued that the order should have been passed within one month from the end of the month in which the initial reply was submitted. The respondent contended that the reply was partial, granting an extended time for a final response, thus justifying the order's timing on 25.07.2022. The Court agreed with the respondent's interpretation, stating that the one-month timeframe should commence from the extended deadline, allowing the order to be passed within the stipulated timeframe.

Issue 3: Non-supply of material
The Court acknowledged the requirement, as per the Supreme Court judgment in Union of India v. Ashish Aggarwal, to furnish underlying information/material forming the basis for assessment/reassessment proceedings to the petitioner. Consequently, the Court set aside the impugned order dated 25.07.2022 and the consequential notice, remitting the matter to the AO. The AO was directed to provide the material to the petitioner within three weeks of the judgment, allowing the petitioner a further three weeks to respond. Personal hearing was mandated for the petitioner's authorized representative before the AO proceeds further in accordance with the law.

In conclusion, the writ petition was disposed of with directions for the AO to comply with the furnishing of material and subsequent procedural steps, ensuring a fair opportunity for the petitioner to respond effectively.