2023 (12) TMI 412 - HC - Income Tax

Validity of reopening of assessment - correctness of order u/s 148A (d) challenged - notice has been issued under Section 148 - object behind insertion of Section 148A - steps/procedure have been followed by AO prior to issuance of notice u/s 148A(d) - scope of amendment by the Finance Act, 2021 - petitioner seeks to challenge the legality, validity and propriety of the notice issued u/s 148 of the Act seeking to reopen the assessment for the Assessment Year 2016-17 which is based on the order under Section 148(A)(d) - HELD THAT - This Court has culled out the foundational prerequisite of Section 148A of the Act, as aforesaid, to emphasize that if the inquiry contemplated in Section 148A is interpreted to mean a detailed inquiry where both sides can seek and adduce evidence/material (documentary/ocular), then the entire object behind Section 148A would stand defeated. The object behind Section 148A as is evident from the findings in the fountainhead decision of GKN Driveshafts (India) Ltd. 2002 (11) TMI 7 - SUPREME COURT is to enable the assessee to be informed of the reasons and information suggesting that income chargeable to tax has escaped assessment and, therefore, in turn to empower the assessee to prepare and file an effective reply and thereafter the Assessing Officer to pass an order under Section 148A(d), followed by issuance of notice under Section 148 of IT Act. The object behind insertion of Section 148A by the Legislature w.e.f. 01.04.2021 inter alia appears as follows - (a) to prevent rampant and casual issuance of notice u/S. 148 by the Revenue; (b) to save unnecessary harassment to the assessee of being subjected to reopening a case under Section 148; (c) to save the Revenue of the time and energy which may be vested pursuing frivolous and fruitless proceedings u/S 148 Considering the aforesaid, normally, the writ Court should not interfere at such premature stage when the proceedings initiated against the assessee are yet to be concluded by the statutory authorities. This Court refrains to interfere with the order(s)/notice(s) impugned. Pertinently, the question of going into the veracity and genuineness of the material/evidence forming the opinion of the AO suggesting that income of petitioner/assessee has escaped assessment ought not to be gone into while exercising writ jurisdiction under Article 226 or supervisory jurisdiction under Article 227 of the Constitution of India.

Summary

Issues Involved:
1. Legality and validity of the notice issued under Section 148 of the Income Tax Act.
2. Compliance with the principles of natural justice.
3. Maintainability of the writ petition against the show-cause notice.

Summary:

1. Legality and Validity of the Notice Issued Under Section 148:
The petitioner challenged the legality, validity, and propriety of the notice dated 20.03.2023 issued under Section 148 of the Income Tax Act, seeking to reopen the assessment for the Assessment Year 2016-17. The petitioner argued that the notice and the order under Section 148A(d) were "illegal, without jurisdiction, arbitrary, in violation of the principles of natural justice." The court noted that the procedure under Section 148A, including conducting an enquiry, issuing a show-cause notice, considering the taxpayer's reply, and deciding on the issuance of a notice under Section 148, was followed by the Assessing Officer.

2. Compliance with the Principles of Natural Justice:
The petitioner contended that the order under Section 148A(d) was passed without considering the reply submitted by the petitioner and without affording a proper opportunity of hearing. The court referred to the procedural requirements under Section 148A, emphasizing that the Assessing Officer must conduct an inquiry and provide an opportunity of being heard to the assessee before issuing a notice under Section 148. The court found that these steps were followed by the Assessing Officer in this case.

3. Maintainability of the Writ Petition Against the Show-Cause Notice:
The respondents raised a preliminary objection regarding the maintainability of the petition against the show-cause notice, arguing that the reopening of assessment was at an initial and premature stage. They contended that the petitioner would have various opportunities to raise grievances and submit replies as per the provisions of law. The court referred to several judgments, including the Supreme Court's decision in Union of India vs. Kunishetty Satyanarayan, which emphasized that writ courts should not interfere at a premature stage when statutory remedies are available. The court concluded that the present petition was not maintainable and dismissed it, granting liberty to the petitioner to avail the statutory alternative remedy under the Income Tax Act.

Conclusion:
The High Court dismissed the writ petition, refraining from interfering with the impugned order(s)/notice(s) and emphasizing the availability of alternative statutory remedies for the petitioner. The court highlighted the importance of following the procedural requirements under Section 148A and the need to prevent premature interference by writ courts in ongoing statutory proceedings.