2023 (11) TMI 345 - HC - Income Tax

Validity of reassessment u/s 147 - allegation of not filing of return of income - HELD THAT - The order passed u/s 148A(d) is unsustainable. This is because the notice u/s 148A(b) of the Act does not call upon Petitioner to provide any justification on any transaction in question. The entire basis for issuing the notice u/s 148A(b) was that Petitioner was a non-filer as he has failed to file the Return of Income and therefore, the income from salary and purchase of securities have not been declared/offered for taxation. But the fact is Petitioner has filed his Return of Income and has also paid total tax and had also claimed refund - Therefore, the order under Section 148A(d) of the Act, passed on 26th April 2023, has to be quashed and set aside. We would go a step further and say that even the notice under Section 148A(b) of the Act was unjustified. This is because the Assessing Officer ( AO ) before issuing the notice, was bound to atleast verify or enquire following the information that was received in accordance with the Risk Management Strategy. If the AO had only verified in the portal of assessee before initiating proceedings, particularly when he had the PAN number with him, AO would have realized that not only Petitioner has filed the Return of Income, but also the return has been processed and an order dated 26th February 2020 u/s 143(1) of the Act had been passed. Therefore, the notice that was issued under Section 148A(b) of the Act also has to be quashed and set aside. Decided in favour of assessee.

Summary

Issues involved:
The issues involved in the judgment are related to the notice issued under Section 148A(b) of the Income Tax Act, 1961 alleging that income chargeable to tax for Assessment Year 2019-2020 has escaped assessment, and the subsequent order passed under Section 148A(d) rejecting the objections raised by the Petitioner.

Details of the Judgment:

1. Notice under Section 148A(b) of the Act:
The Petitioner, an individual assessed to income from various sources, received a notice dated 31st March 2023 under Section 148A(b) alleging that income chargeable to tax for Assessment Year 2019-2020 had escaped assessment. The basis for re-opening was the Petitioner's failure to file a return of income despite having a significant salary and purchase of securities.

2. Response to Notice:
The Petitioner responded to the notice by stating that the Income Tax Return for the relevant year had indeed been filed, and the return was attached for reference. However, the subsequent order passed under Section 148A(d) on 26th April 2023 rejected the objections raised by the Petitioner.

3. Judicial Review:
The High Court found the order under Section 148A(d) unsustainable as the notice did not call upon the Petitioner to provide justification on the transactions in question. The Petitioner had filed the Return of Income, paid the total tax, and claimed a refund, rendering the order and notice invalid.

4. Verification Requirement:
The Court highlighted that the Assessing Officer was obligated to verify information before issuing a notice under Section 148A(b). Guidelines emphasized the need for proper verification and an opportunity for the assessee to be heard before initiating proceedings under Section 148/147 of the Act.

5. Court's Decision:
The Court quashed and set aside the impugned order under Section 148A(d) and the notice issued under Section 148A(b) of the Act. The Petition was disposed in favor of the Petitioner, calling for the records to be examined for legality and validity, ultimately canceling the impugned notices and orders issued by the Respondents.