2023 (2) TMI 582 - HC - Income Tax

Reopening of assessment u/s 147 - order rejecting the objections to reopening - Denial of natural justice - HELD THAT - Considering all the above circumstances and applying the ratio of the judgment of this Court in Tata Capital Financial Services Limited 2022 (2) TMI 1093 - BOMBAY HIGH COURT and specific directions contained therein to the revenue, we are of the considered opinion that the Assessing Officer has acted in gross violation of the directions in Tata Capital Financial Services Limited 2022 (2) TMI 1093 - BOMBAY HIGH COURT and in contravention of the provisions of Article 14 of the Constitution of India. Consequently, the impugned orders issued under Section 148 of the Act, order rejecting the objections to reopening passed by the Respondent No.2, Assessment order, Notice of demand issued under Section 156 of the Act, and Penalty notice dated 31.03.2022 issued under Section 271(1)(c) of the Act, are quashed and set aside. The matter is now remanded back to the Assessing Officer, who shall provide the Petitioner with the satisfaction note of the Principal Commissioner of Income Tax, granting approval for issuance of Notice under Section 148 of the Act, the appraisal report from DDIT (Inv), and bank statements of M/S Sanyam Gems Pvt. Ltd., the statement of Shri Shripal Vora at Bhavnagar, recorded under Section 131 of the Act, and all other documents and material, which form the basis of the reasons recorded by the Assessing Officer for issuing notice under Section 148 of the Act - Decided in favour of assessee.

Issues Involved:
1. Challenge to the order under Section 148 of the Income Tax Act, 1961.
2. Challenge to the rejection of objections to the reopening of assessment.
3. Challenge to the assessment order under Section 147 read with Section 143(3) of the Act.
4. Challenge to the notice of demand under Section 156 of the Act.
5. Challenge to the penalty notice under Section 271(1)(c) of the Act.
6. Alleged violation of principles of natural justice.
7. Alleged non-compliance with procedural requirements for reopening assessments.

Issue-wise Detailed Analysis:

1. Challenge to the order under Section 148 of the Income Tax Act, 1961:
The Petitioner challenged the order dated 31.03.2021, issued under Section 148 of the Act, claiming that the Assistant Commissioner of Income Tax issued the notice without providing an opportunity for a hearing, thereby violating the principles of natural justice. The Petitioner argued that the notice was issued without furnishing the reasons for reopening the assessment and without the necessary documents, such as the satisfaction note of the Principal Commissioner of Income Tax.

2. Challenge to the rejection of objections to the reopening of assessment:
The Petitioner objected to the reopening of the assessment, which was rejected by the Respondent on 22.03.2022. The Petitioner contended that the rejection was arbitrary and without addressing the contentions raised. The Petitioner also highlighted that the Respondent did not provide the appraisal report or the satisfaction note, which were crucial for the reopening of the assessment.

3. Challenge to the assessment order under Section 147 read with Section 143(3) of the Act:
The Petitioner received an assessment order dated 31.03.2022, which reassessed the income for the assessment year 2013-14, claiming that an amount of Rs.2,00,00,000/- had escaped assessment. The Petitioner argued that the order was passed without providing an opportunity for a hearing and without furnishing the necessary documents, thereby violating the principles of natural justice.

4. Challenge to the notice of demand under Section 156 of the Act:
Along with the assessment order, the Petitioner was served with a notice of demand under Section 156 of the Act. The Petitioner challenged this notice on the grounds that it was issued without following due process and without providing the necessary documents and an opportunity for a hearing.

5. Challenge to the penalty notice under Section 271(1)(c) of the Act:
The Petitioner also challenged the penalty notice dated 31.03.2022, issued under Section 271(1)(c) of the Act. The Petitioner argued that the penalty notice was issued without adhering to the principles of natural justice and without providing the necessary documents and an opportunity for a hearing.

6. Alleged violation of principles of natural justice:
The Petitioner contended that the Respondent violated the principles of natural justice by not providing an opportunity for a hearing and by not furnishing the necessary documents, such as the satisfaction note, appraisal report, and statements recorded during the search and seizure operation. The Petitioner argued that these documents were crucial for contesting the reopening of the assessment and the subsequent orders.

7. Alleged non-compliance with procedural requirements for reopening assessments:
The Petitioner argued that the Respondent did not comply with the procedural requirements laid down by the court for reopening assessments. The Petitioner relied on the judgment in Tata Capital Financial Services Limited vs. Assistant Commissioner of Income Tax, where the court had issued specific directions for providing documents and granting a personal hearing before passing orders for reopening assessments. The Petitioner contended that the Respondent's actions were in complete contravention of these directions.

Conclusion:
The court found that the Respondent acted in gross violation of the principles of natural justice and the specific directions issued by the court in Tata Capital Financial Services Limited vs. Assistant Commissioner of Income Tax. The court quashed and set aside the impugned orders, including the order under Section 148, the rejection of objections, the assessment order, the notice of demand, and the penalty notice. The matter was remanded back to the Assessing Officer with directions to provide the necessary documents to the Petitioner, grant a personal hearing, and then proceed to pass orders in compliance with the court's directions.

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