2023 (2) TMI 1120 - HC - Income Tax

Reopening of assessment u/s 147 - validity of order passed u/s 148A(b) - Department/ Revenue going beyond the show-cause notice - as contented authorities while passing the order u/s 148A(b) and Section 148 of the Act have considered certain transactions which were not part of the notice that was originally issued to the petitioner under Section 148 of the old Act and also u/s 148A(b) of the new Act - HELD THAT - As glaringly visible from the two notices that were issued on 29.06.2021 as also on 25.05.2022 i.e. the notice initially issued under Section 148 of the old Act and under Section 148A(b) of the new Act that the department has not disclosed the fact in its notice of the petitioner having suppressed this 14 Lakh rupees transaction and this has also escaped assessment of the Department. In the absence of the same being reflected in the notice, the assessment yet being made of the said amount would be prima facie bad in the light of the judgment of the Supreme Court in case of Commissioner of Customs, Mumbai Vs. Toyo Engineering India Ltd. 006 (8) TMI 184 - SUPREME COURT wherein as emphatically held that the Department cannot travel beyond the show cause notice. Thus keeping in view the circular of the Department this court is of the opinion that the order under Section 148A(b) and order Section 148 in the given factual backdrop would not be sustainable. The same therefore deserves to be and is hereby set aside reserving the right of the Department, if the law permits, to take appropriate recourse available in accordance with law.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 and order under Section 148A(b) of the Act, 1961.

Analysis:
1. The primary contention raised by the petitioner's counsel is that certain transactions considered by the authorities were not part of the original notice issued under Section 148 of the Act. The petitioner argues that excluding a specific transaction of Rs. 14 Lakhs would bring the total amount under assessment to less than 50 Lakhs, falling outside the purview of assessment proceedings as per a circular dated 11.05.2022.

2. The petitioner asserts that the authorities included the Rs. 14 Lakhs transaction made by a third party in the assessment, which was not part of the original notices issued. This lack of disclosure in the notice, according to the petitioner, renders the assessment invalid, citing the Supreme Court's ruling that the department cannot go beyond the show cause notice.

3. Referring to the circular dated 11.05.2022, the petitioner argues that excluding the Rs. 14 Lakhs transaction would reduce the escaped income to Rs. 36,99,555, below the threshold for initiating assessment proceedings. The petitioner contends that the assessment order under Section 148A(b) is unsustainable based on these grounds.

4. The court considered previous judgments, including one by the Bombay High Court, emphasizing the necessity of recording reasons for reopening assessments and limiting assessment to the reasons recorded. The court also cited a Division Bench ruling that the department cannot exceed the scope of the show-cause notice.

5. Based on the facts presented and the circular dated 11.05.2022, the court concluded that the orders under Section 148A(b) and Section 148 of the Act dated 22.07.2022 were not sustainable. Consequently, the court set aside the orders, allowing the writ petition and disposing of the case.