2023 (4) TMI 1118 - HC - Income Tax

Validity of reopening of assessment u/s 147 - Increase in share capital - As it is the petitioner s case, that insofar as the allegation with regard to the increase in share capital was concerned, this aspect was scrutinized by the AO while passing the order u/s 143(3) of the Act. Also allegation made in the notice issued under Section 148A(b) of the Act, and the order passed u/s 148A(d) does not seem to have etched out clearly, as to what is the connection in increase in share capital, and the transaction that the petitioner allegedly has entered into with RCI. HELD THAT - Since a show-cause notice has been issued, and the reply is stated to be on the record, the AO will take the same into account, before he proceeds further in the matter. As noticed above, further reply was filed. In case the said reply is not on the record, the AO will give leave to the petitioner to have the aforesaid reply placed on record. The AO will take the said reply into account as well. Since the period for completing the assessment, we are told, is coming to an end on 31.03.2023, eight weeks are granted to the AO, to take a decision in the matter, commencing from the date of receipt of the copy of the judgement. Petitioner unreservedly, says that objections with regard to limitation having been passed, will not be put against the respondents/revenue. Writ petition disposed of.

Summary

Issues Involved:
The writ petition challenges an order passed under Section 148A(d) and a show-cause notice under Section 148 of the Income Tax Act, 1961. The challenge also extends to a show-cause notice dated 15.03.2022 issued under Section 148A(b) of the Act.

Challenge to Order and Notices:
The impugned notices and order pertain to Assessment Year (AY) 2018-19. The petitioner is alleged to have engaged in transactions with RCI Industries and Technologies Limited involving bogus increase in share capital and purchase bills. The AO issued notices under Section 148A(b) and 148A(d) based on these allegations.

Contention and Explanation:
The AO's contentions regarding the petitioner's transactions with RCI were outlined in the notices and order. Despite lack of clarity, the AO's position was explained by the senior standing counsel for the respondents/revenue. The petitioner did not initially reply to the notices but later submitted responses.

Approval and Compliance:
There is a dispute regarding the timing of approvals for the notices and order. The petitioner argues that approvals were obtained before the order was passed, while the respondents defend the approval process. The common reference number on the notices and order raises questions about procedural compliance.

Additional Responses and Scrutiny:
The petitioner provided further replies to the show-cause notices, emphasizing scrutiny of share capital issues in a previous order. The connection between the increase in share capital and transactions with RCI was not clearly established in the notices and order.

Decision and Directions:
The court urged the AO to consider all responses on record before proceeding with the assessment. Additional time was granted for the AO to make a decision, considering the impending deadline for completing the assessment. Both parties agreed to dispose of the writ petition based on the directions issued by the court.