2023 (2) TMI 754 - HC - Income Tax

Reopening of assessment u/s 147 - denial of prnciple of natural justice - non providing of information as relied upon - whether any information which is sought to have obtained from the INSIGHT have been furnished to the petitioner? - HELD THAT - As information which had resulted into initiating the actions, have not been furnished. This being a basic requirement u/s148A where the Assessing Officer before issuance of any notice u/s 148 is firstly to conduct an inquiry and if required, with the prior approval of the specified authority with respect to the information which suggest that the income chargeable to tax has escaped the assessment and sub-clause (b) of Section 148 provides for an opportunity of being heard to the assessee by serving upon him a notice to show cause within such time as may be specified in the notice being not less than seven days, but, not exceeding 30 days from the date on which such notice is issued or such time as may be extended by him on the basis of the application. Non-providing of the information which is the edifice for issuance of notice would surely amount to not providing an opportunity to the petitioner. As at the time of its response to the notice under Section 148A(b), the attention of the authority concerned had been drawn to the fact that those information are missing which would result into the petitioner not being in a position to respond effectively to the allegations of the alleged bogus purchases to the tune of Rs. 69.61 crores (rounded off). This being the case, in our opinion, the petitioner has been able to make out a breach of principle of natural justice resulting into this Court not waiting for the alternative remedy also to come in the way in denying the relief to the petitioner. Resultantly, interference is required at this stage quashing and setting aside the order u/s 148A(d) by directing the authority concerned to furnish the information within seven days of the receipt of copy of this order.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 and order under Section 148A(d) seeking to reopen income tax assessment for the assessment year 2018-19.

Analysis:
1. The petitioner, a company engaged in trading of shares and securities, challenged a notice dated 08.04.2022 under Section 148 of the Income Tax Act, 1961, and an order dated 08.04.2022 under Section 148A(d) seeking to reopen its income tax assessment for the assessment year 2018-19. The petitioner sought various reliefs, including quashing the notice and order, staying further proceedings, and seeking just and proper relief in the interest of justice.

2. The petitioner's assessment for the year 2018-19 was selected for scrutiny, and details of investments in commodities transactions were sought. The assessment was framed disallowing a loss incurred on trading in fabrics. An appeal was made against the assessment order, alleging a violation of natural justice, but was eventually withdrawn as an appeal was filed before the Commissioner of Income Tax (Appeals).

3. The petitioner challenged the respondent's action, arguing that the addition made was in respect of losses on commodities trading, which were already subject to an appeal before the first Appellate Authority. The petitioner questioned the issuance of the notice under Section 148, citing lack of information provided.

4. The respondent issued a notice under Section 148A(b) based on flagged high-risk transactions, alleging fictitious transactions of bogus purchases. The petitioner responded, disputing the allegations and requesting the proceedings to be dropped. Despite objections, an order under Section 148A(d) was passed, leading to the issuance of the impugned notice.

5. The Court noted that essential information triggering the notice was not furnished to the petitioner, violating the principles of natural justice. The failure to provide this information hindered the petitioner's ability to respond effectively to the allegations, constituting a breach of natural justice.

6. Consequently, the Court allowed the petition, quashing and setting aside the order under Section 148A(d) and directing the authority to provide the necessary information to the petitioner within seven days. The petitioner was given two weeks to respond, and proceedings were to continue thereafter in accordance with the law.

7. The Court clarified that its findings would not affect the final adjudication of the matter, ensuring that both parties could present their cases without prejudice. The petition was allowed and disposed of, with any related civil applications also being disposed of accordingly.