2023 (6) TMI 1136 - HC - Income Tax

Validity of Reopening of assessment - validity of order passed u/s 148A(d) as different form notice issued u/s 148A(b) - HELD THAT - A perusal of the said notice shows that it is alleged that income chargeable to tax had escaped assessment, on account of transaction referred to therein. The transaction, which is referred to in the said notice, concerns the purchase of shares by the petitioner, involving a company going by the name, Lendingkart Technologies Pvt. Ltd. A perusal of the order u/s 148A(d) would show that the petitioner s explanation with regard to the source of investment was accepted. This is evident upon a plain reading of paragraph 5 of the said order. What went against the petitioner is that it had not submitted the following documents a copy of the share subscription agreement, a copy of the share certificate issued by LTPL and copy of valuation report on the date of purchase of share. AO, thus, concluded, in our view erroneously, that in the absence of the valuation report, it could not be determined whether shares were purchased at fair market value, as per the provisions of Section 50CA of the Act, or not. Undoubtedly, this aspect of the matter was never put to the petitioner in the notice issued u/s 148A(b) of the Act. Since even according to the respondent/revenue, this was a case where an investment was made and not a transaction involving the transfer of shares, facially, the provisions of Section 50CA perhaps, were not applicable. Accordingly, in our view, the best way forward would be to set aside the impugned order passed u/s 148A(d).

Summary

Issues involved:
The judgment concerns a writ petition challenging an order passed under Section 148A(d) of the Income Tax Act, 1961 for Assessment Year (AY) 2019-20. The petitioner also challenges a notice issued under Section 148 of the Act and another notice issued under Section 148A(b) of the Act.

Challenge to Order and Notices:
The petitioner challenged the order dated 28.04.2023 passed under Section 148A(d) of the Income Tax Act, 1961, as well as notices issued under Section 148 and Section 148A(b) of the Act. The petitioner argued that the Assessing Officer (AO) deviated from the original allegation made in the notice dated 23.03.2023 issued under Section 148A(b) of the Act.

Allegations and Conclusion:
The notice dated 23.03.2023 alleged that income chargeable to tax had escaped assessment due to a transaction involving the purchase of shares from Lendingkart Technologies Pvt. Ltd. The order dated 28.04.2023 accepted the petitioner's explanation on the source of investment but raised issues regarding missing documents related to the share transaction. The AO concluded that without a valuation report, it was unclear if shares were purchased at fair market value as per Section 50CA of the Act.

Errors in Assessment:
The court found errors in the assessment process as the AO did not raise the valuation report issue in the original notice. Additionally, since this was an investment case and not a share transfer, the provisions of Section 50CA may not have been applicable. Consequently, the court set aside the order dated 28.04.2023 and declared the consequential notice of the same date invalid.

Next Steps and Disposal:
The AO was granted liberty to proceed in accordance with the law and was instructed to base any future actions on the original allegation in the notice issued under Section 148A(b) of the Act. The writ petition was disposed of with parties instructed to comply with the digitally signed copy of the order.