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2023 (10) TMI 333 - HC - Income TaxValidity of reopening of assessment - notice u/s 148A(b) - Assessee under the IT Act had stood for the elections to the Legislative Assembly in pursuance to which he declared his movable and immovable assets as well as those in the name of his spouse and dependents, in accordance with the said requirement, along with his nomination papers - As per AO Amounts stated, with reference to unspecified lands and vehicles - sufficiency of the information supplied to the assessee based on which the proceeding under Section 148A was initiated - HELD THAT - The petitioner was issued with a notice under Section 131(1A) produced at Annexure-2. It has been very specifically stated that the notice is pursuant to verification of the affidavits filed by the candidates contesting elections as mandated by the Election Commission of India. The disclosure of assets and liabilities were compared with the information available from the records of the department and sources of income with respect to five aspects, with separate amounts specified, were sought from the petitioner. The petitioner had supplied documents as per Annexures 3 to 6 and also as seen from Annexures 8 and 9. A further notice (Annexure-10) was issued under Section 148A(b) of the IT Act in which the specific proposal for escaped income was with respect to the purchase of agriculture land and purchase of vehicle, as available under the column for description and the amounts were specified as Rs. 55,00,000/- and Rs. 33,41,277/-. We should understand from the manner in which the tabulation is prepared that Rs. 55,00,000/- referred to, is of the agriculture land and Rs. 33,41,277/- referred to, is of the purchase of vehicle. We have to immediately notice that the amounts shown does not tally with what has been separately detailed under Annexure-2 notice. It also does not refer to the specific documents based on which the allegation of escaped income is raised. Despite this, the Income Tax Authority proceeded and passed an order under Section 148 A(d) as per Annexure-13. In Annexure-13 it has been stated that the showcause notice was not replied to. There is no reference to Annexure 8, which is said to have been filed by the assessee. Based on Annexure-13 order passed under Section 148 A(d), now a notice under Section 148 of the IT Act (Annexure-14) has been issued. We perfectly agree with the submission of the learned Senior Standing Counsel that an order passed under Section 148A(d) does not regulate the further proceedings under Section 148 and the prima facie satisfaction entered into by the Income Tax Authority, in so far as the case being one fit for being proceeded under Section 148, cannot lead to an automatic addition being made of the proposed unescaped income. However, when the statutory mandate is that an inquiry should be conducted, if required and a notice issued, both with the prior approval of the specified authority with supply of the information which prompted the initiation of the proceedings; then neither can the information supplied be meagre and haphazard nor can the prima facie satisfaction be entered into in a mechanical manner. As the submission of the department that the notice u/s 131(1A) was issued based on the declaration made by the petitioner along with his nomination papers. There were also documents supplied by the petitioner pursuant to the notice based on which a further notice was issued under Section 148A(b) in which the basis of the notice is to be disclosed; the absence of which is very evident. But for the description of unexplained investment with respect to landed property and vehicle and the amount of escaped income proposed, nothing else was stated. It is very evident that the details sought for u/s 131(1A) were with respect to separate investments made on agriculture land, inherited commercial land, investments made in the property belonging to the HUF comprising of the petitioner and his family members, deposits in banks and two vehicles purchased by himself and his son. There is no specification as to which among them was sought to be proceeded against under Section 148. Petitioner has now produced a corrigendum issued by the department as Annexure- 16 dated 30.05.2023. The corrigendum has more specification in so far as the unexplained investments, with respect to purchase of agriculture land coming to Rs. 26,72,000/- and the purchase of a vehicle coming to Rs. 6,69,277/-. We cannot but notice that the corrigendum is dated 30.05.2023 while the order passed under Section 148A(d) is dated 24.03.2023 on which date itself the notice under Section 148 was issued; the latter two documents having been produced as Annexure-13 and Annexure-14. Hence, obviously, there is infirmity and illegality in the order passed under Section 148A(d) which vitiates the further notice issued under Section 148. The corrigendum issued more than two months after the order under Section 148A(d) vitiates the order beyond repair. We also notice that sufficient material regarding the assets on which investments are alleged to have been made have also not been disclosed in the notice under Section 148A(b). If an agriculture land is referred to, it is only proper that the description along with the details of the location as also the specification of the deed by which the acquisition was made should be informed to the assessee. Similarly in the case of a vehicle, the Registration Number and the details are to be supplied. Only such information supplied would enable the assessee to make an effective reply; even if the said investments are picked out from the assets and liabilities declared by the assessee based on which the proceedings were initiated. We hence set aside Annexures 10, 13 and 14. We make it clear that the Assessing Officer would be entitled to initiate fresh proceedings subject to just exceptions.
Issues Involved:
1. Validity of notice issued under Section 148A(b) of the Income Tax Act, 1961. 2. Validity of order under Section 148A(d) of the Income Tax Act, 1961. 3. Sufficiency of information provided to the petitioner for effective reply. 4. Legality of the corrigendum issued after the order under Section 148A(d). Summary: 1. Validity of Notice under Section 148A(b): The petitioner challenged the notice under Section 148A(b) of the Income Tax Act, claiming it lacked sufficient material and details regarding the alleged unexplained investments. The court noted that the notice merely described the unexplained investments in agricultural land and vehicles without specific details, which is insufficient for forming a prima facie satisfaction required under Section 148A. 2. Validity of Order under Section 148A(d): The petitioner argued that the order under Section 148A(d) was passed mechanically without considering his reply. The court observed that the order did not reference the reply submitted by the petitioner and was based on inadequate information. The court emphasized that the prima facie satisfaction for proceeding under Section 148 cannot be mechanical and must be based on detailed and specific information. 3. Sufficiency of Information Provided: The court highlighted the necessity of providing detailed information to the assessee to enable an effective reply. The notice under Section 148A(b) lacked specific details about the alleged unexplained investments, such as the location and description of the agricultural land and vehicle registration numbers. The court found that the information provided was insufficient for the petitioner to make an effective reply. 4. Legality of the Corrigendum: The court noted that a corrigendum issued by the department after the order under Section 148A(d) provided more specific details about the investments. However, the corrigendum was issued more than two months after the order, rendering the order under Section 148A(d) and the subsequent notice under Section 148 legally infirm and vitiated. Conclusion: The court set aside the notices and orders under Sections 148A(b), 148A(d), and 148 due to the lack of sufficient and specific information provided to the petitioner, which is essential for forming a valid prima facie satisfaction. The court allowed the writ petition, granting liberty to the Assessing Officer to initiate fresh proceedings with proper and detailed information.
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