2023 (8) TMI 767 - HC - Income Tax

Validity of reopening of assessment u/s 147 - reasons to believe - non furnishing of information to petitioner which prompted reassessment proceedings - HELD THAT - A perusal of record, as presently made available to us, does seem to indicate that no material or information has been furnished to the petitioner, in support of the allegations levelled against him. The impugned order only adverts to the fact, that in a search action against Jignesh S Shah and another person i.e., Sanjay Shah, certain information emerged, which seemed to suggest that they were in the business of providing accommodation entries. It is also suggested, that Directors of those companies had filed affidavits, in which the name of the petitioner appeared as one of the beneficiaries of the accommodation entries. It is in this backdrop, that the reassessment proceedings appear to have been triggered against the petitioner. It appears, that the Assessing Officer (AO) has failed to do even the minimum, which is to furnish a copy of the affidavit filed by those Directors. Respondent on the other hand, submits that it is quite possible, that the information is in the custody of the AO, which the AO, for whatever reason, has failed to furnish. Given this position, we are inclined to set aside the impugned notices and the order. It is ordered accordingly.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961; Challenge to order under Section 148A(d) and notice under Section 148A(b) for Assessment Year 2014-2015.

Analysis:
The High Court heard a writ petition against a notice issued under Section 148 of the Income Tax Act, 1961, along with challenges to orders under Sections 148A(d) and notices under 148A(b) for the Assessment Year 2014-2015. The petitioner was accused of benefiting from accommodation entries provided by an individual, involving a fictitious loan. The petitioner had undergone scrutiny assessment previously, and it was highlighted that no transaction occurred with the individual in question during the relevant financial year. The petitioner also argued that no supporting material or information was provided to substantiate the allegations. The court noted that no such material was furnished to the petitioner, and the order was based on information from a search action against other individuals. The court criticized the Assessing Officer for not providing a copy of the affidavit that mentioned the petitioner as a beneficiary of the accommodation entries. The respondent suggested that the information might be with the AO but was not shared. Consequently, the court decided to set aside the notices and the order, allowing the AO to conduct a fresh assessment but mandating the furnishing of relevant information to the petitioner and granting a personal hearing before any proceedings.

This judgment highlights the importance of providing adequate information and ensuring a fair opportunity for the assessee to respond to allegations during income tax proceedings. It emphasizes the duty of the Assessing Officer to provide necessary documents and conduct assessments transparently. The court's decision to quash the notices and order underscores the significance of procedural fairness and the right of the assessee to be informed and heard in tax matters.