2023 (12) TMI 649 - HC - Income Tax

Validity of reassessment proceedings - Scope of new regime u/s 148A - non consideration of reply of petitioner before passing the order u/s. 148A(d) of the Amended IT Act and non compliance of order passed by the Apex Court in Union of India and Ors. Vs. Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT - contention of petitioner that pursuant to receipt of legible copies on 07.06.2022, petitioner submitted reply on 18.06.2022 is denied by the Revenue by contending that neither soft nor hard copy of any reply to show-cause notice dated 19.05.2022 was received in the office of respondents, and therefore, the Assessing Officer was well within his rights to pass the impugned order u/s. 148A(d) and issue the consequential notice u/s. 148 of amended IT Act. HELD THAT - At first blush, this contention of petitioner appears to be tenable. However, looking from the angle of concept of affording reasonable opportunity which is the foundational object behind Sec. 148A, it is seen that presently proceedings u/s. 148 have commenced in which the petitioner is being afforded reasonable opportunity of being heard. Pertinently, amendment to the IT Act w.e.f. 01.04.2021 introduced an additional opportunity for being heard by prescribing issuance of show-cause notice u/s. 148A before commencing proceedings u/s. 148 of amended IT Act. Thus, after introduction of Sec. 148A under the amended IT Act, the assessee is vested with statutory right of being heard by way of issuance of notice followed by affording of reasonable opportunity to submit reply and corresponding obligations on the part of Assessing Officer to consider reply and thereafter pass orders u/s. 148A(d). What comes out loud and clear is that the Assessing Officer either did not receive the reply filed by petitioner to show-cause notice dated 19.05.2022 after receiving legible copies of documents from the Revenue, or the petitioner did not successfully upload the reply on the website of Revenue. To resolve the aforesaid dispute, the traditional way out is to quash the impugned order and notice (Annexures P/12 and 13) and remand the matter to the Assessing Officer for considering the reply filed by petitioner to show-cause notice dated 19.05.2022 and thereafter pass fresh order. However, doing so would delay and prolong the proceedings which have commenced by issuance of show-cause notice u/s. 148 of IT Act. This Court thus, deems it appropriate and in fitness of things to adopt middle path for the sake of expediency by directing the AO to consider the reply of petitioner to show-cause notice dated 19.05.2022 and only thereafter proceed with the case u/s. 148 of IT Act. This petition stands disposed of in the following terms - (i) The Assessing Officer is directed to consider the reply of petitioner to show-cause notice dated 19.05.2022, submitted after receiving legible copies and on consideration if it is found that reply is satisfactory, then the Assessing Officer is directed to drop proceedings u/s. 148A and recall the order u/s. 148A(d). (ii) In case, the reply to Sec. 148A is not found satisfactory, then the Assessing Officer will be well within his powers to proceed u/s. 148 of amended IT Act. (iii) While complying with the aforesaid direction No.1, the Assessing Officer shall not be influenced or prejudiced by the impugned order u/s. 148A(d) and impugned notice issued u/s. 148 of amended IT Act.

Summary

Issues:
Challenge to order dated 30.06.2022 passed u/s. 148A(d) of the Income-Tax Act, 1961.
Challenge to notice dated 30.06.2022 issued u/s. 148 of IT Act for the assessment year 2014-15.

Challenge to Order and Notice:
The challenge to the order and notice is based on the non-consideration of the petitioner's reply before passing the order u/s. 148A(d) of the Amended IT Act and non-compliance with the order dated 04.05.2022 passed by the Apex Court in Union of India and Ors. Vs. Ashish Agarwal. The Apex Court directed that all Section 148 notices issued under the unamended IT Act should be treated as notices issued u/s. 148A(d) of the amended IT Act. The Assessing Officer was required to provide information and material relied upon by the Revenue to the assessees so they could reply within two weeks. The order was applicable Pan India and governed pending writ petitions challenging similar notices issued after 1-4-2021.

Factual Background:
The Finance Act, 2021 inserted Sec. 148A in the IT Act from 01.04.2021, providing an additional opportunity of being heard in cases of income escaping assessment. A show-cause notice u/s. 148 of the IT Act (Unamended) was issued on 16.04.2020 for the assessment year 2014-15. Subsequently, notices and replies were exchanged between the petitioner and the Revenue, leading to the impugned order and notice dated 30.06.2022.

Petitioner's Contentions:
The petitioner contended that their reply to the show-cause notice dated 19.05.2022 was not considered before the impugned order was passed. The Revenue supplied legible copies of material after the show-cause notice, and the petitioner submitted a detailed reply, which the Revenue claimed they did not receive.

Court's Analysis:
The Court noted that the proceedings under Sec. 148A had commenced, providing the petitioner with a reasonable opportunity to be heard as per the amended IT Act. The Assessing Officer's receipt of the petitioner's reply was disputed, leading to a dilemma regarding the next steps in the proceedings.

Court's Decision:
To expedite the proceedings, the Court directed the Assessing Officer to consider the petitioner's reply to the show-cause notice dated 19.05.2022. If found satisfactory, the proceedings under Sec. 148A were to be dropped, and the order recalled. If unsatisfactory, the Assessing Officer could proceed under Sec. 148 of the amended IT Act, without prejudice from the impugned order and notice.

Conclusion:
The petition was disposed of with directions for the Assessing Officer to review the petitioner's reply before further action under the IT Act. No costs were awarded in the matter.