2023 (7) TMI 458 - HC - Income Tax

Reopening of assessment - validity of notice issued u/s 148A - proof of allegation of escapement of income - as argued allegation of liability towards a single party was not incorporated in the show cause notice despite the fact that the same was well within the knowledge of respondent - HELD THAT - It is not in dispute that the reply is silent on the fact that how the reply given by the petitioner was dealt with while passing the impugned order u/s 148A. It is also not in dispute that now on 01.05.2023, the verification report dated 18.06.2021 has been uploaded on the portal of DDIT, Rohtak. Further in the initial notice dated 24.03.2023 (P-1), it had not been reflected the amount received from M/s Dholagiri Enterprises. Thus, the petitioner has no occasion to file reply on that effect. Since the above verification report was never part of the impugned show cause notice and keeping in view the above mentioned judgments, the present petition is allowed and notice issued under Section 148A (d) (P-1) and impugned notice issued under Section 148 (P-4) are set aside.

Summary

Issues:
The judgment involves the quashing of impugned notices and orders under Section 148A and Section 148 based on allegations of liability towards a single party and inadmissible expense claims.

Issue 1: Allegation of Liability towards a Single Party
The petitioner sought the quashing of impugned notices and orders on the ground that the liability towards a single party, M/s Dholagiri Enterprises, was not properly incorporated in the show cause notice despite being within the knowledge of the respondent. The petitioner argued that no income was alleged to have been escaped based on this liability. Furthermore, the order dated 31.03.2023 did not reference the petitioner's reply given on 26.03.2023. Citing a judgment from the Delhi High Court, it was emphasized that foundational allegations cannot be added through supplementary challans. The Court allowed the petition, setting aside the impugned notices and orders, while granting liberty to the respondent to proceed in accordance with the law.

Issue 2: Inadmissible Claim of Expense Value
The petitioner also challenged the impugned notices and orders on the ground that there was no allegation of escaped income related to the inadmissible claim of expense value. The petitioner highlighted a case from the Calcutta High Court where an assessing officer abandoned an initial allegation and proceeded with a fresh ground without giving the assessee an opportunity to respond. The Court observed that the impugned order was passed without allowing the assessee to address the new issue. The petition was allowed, and the impugned notices and orders were set aside, with liberty granted to the respondent to take further steps as per the law.

Conclusion:
The High Court allowed the petition, setting aside the impugned notices and orders issued under Section 148A and Section 148. The Court granted liberty to the respondent to proceed lawfully and allowed the petitioner to pursue remedies as per the law. The judgment emphasized the importance of proper incorporation of allegations in show cause notices and the need for assessing officers to provide opportunities for respondents to address all issues raised.