2023 (12) TMI 651 - HC - Income Tax

Reopening of assessment u/s 147 - Time limit for notice - Scope of amended provisions u/s 148 and 148A - HELD THAT - Undisputedly, the provision u/s 148 came to be amended w.e.f. 01.04.2021 and notice u/s 148 was issued on 09.06.2021 ie., the notice was issued after the amended provisions u/s 148 came into force and insertion of Section 148A. In the case at hand, the Parliament amended the provisions u/s 147 to 149 and 151 of the Act of 1961 and the substituted provisions u/s147 to 149 and 151 came into force w.e.f. 01.04.2021. The notice u/s 148 was issued on 09.06.2021. On the date of issuance of notice u/s 148 the respondents are under obligation to comply with the provisions u/s 148A which provide for conducting an enquiry if required by prior approval of the specified authority, providing an opportunity of being heard to assessee by serving him a show-cause notice, to consider the reply, if any, of the assessee to the show-cause notice and thereafter to take decision on the basis of material available on record including the reply whether or not it is a fit case to issue notice u/s148 and to pass order in this regard. Only after passing an order u/s 148A(d) notice u/s 148 is to be issued. By amending the Act of 1961 u/s 147 to 149 and 151 certain safeguards are provided to the assessee. In the case at hand, procedure as provided u/s 148A is not followed by the respondents before issuing notice u/s 148 of the Act, the notice issued u/s 148 is in violation of principle of natural justice and therefore the entire proceedings initiated of passing of an order of assessment is in violation of principle of natural justice and entire proceeding is vitiated in the eyes of law. Even the application seeking material and documents referred in the reasons were not supplied and the said application was dismissed relying upon the decision which was not applicable to the facts of the case at hand on the date of consideration of application, in view of the dictum of the Supreme Court in the case of Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT wherein as ordered to provide the respective assessee the information and material relied upon by the Revenue so that the assessee can reply to the show-cause notice within the specific time frame. In the aforementioned facts of the case and the decisions in the case of Harbanslal Sahnia 2002 (12) TMI 564 - SUPREME COURT and Commercial Steel Limited 2021 (9) TMI 480 - SUPREME COURT the submission for respondent that the writ petition is not maintainable in view of the existence of alternate remedy u/s 246A is not sustainable. This Court is of the considered view that in the facts of the case petition under Article 226 of the Constitution of India is maintainable. The decisions relied upon by the learned counsel for respondents are on different facts. Writ petition is allowed and the order of assessment is set aside. Matter is remitted back to the respondents-authorities for deciding the case afresh treating the notice issued under Section 148 to be a notice u/s 148A and to proceed complying the provisions under Section 148A of the Act of 1961 keeping in mind the decision of Hon ble Supreme Court in the case of Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT and to pass the orders afresh.

Summary

Issues Involved:
1. Validity of Notice under Section 148 of the Income Tax Act, 1961.
2. Compliance with amended provisions under Sections 147 to 149 and 151 of the Income Tax Act, 1961.
3. Availability of alternate remedy under Section 246A of the Income Tax Act, 1961.
4. Principles of natural justice.

Summary:

1. Validity of Notice under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice issued under Section 148 on 09.06.2021 and the assessment order dated 30.03.2022, arguing that the notice was issued without following the amended procedure under Section 148A. The court noted that the amended provisions, effective from 01.04.2021, require compliance with Section 148A before issuing a notice under Section 148. The respondents did not dispute that no proceedings under Section 148A were initiated before issuing the notice under Section 148.

2. Compliance with amended provisions under Sections 147 to 149 and 151 of the Income Tax Act, 1961:
The court highlighted that the amended provisions under Sections 147 to 149 and 151 came into force on 01.04.2021. The notice issued on 09.06.2021 did not comply with the mandatory procedures under Section 148A, which include conducting an enquiry, providing an opportunity of being heard, and passing an order under Section 148A(d) before issuing a notice under Section 148. The court emphasized that these provisions provide safeguards to the assessee and must be followed in their letter and spirit.

3. Availability of alternate remedy under Section 246A of the Income Tax Act, 1961:
The respondents argued that the writ petition should be dismissed due to the availability of an alternate remedy under Section 246A. However, the court referred to the Supreme Court decisions in Harbanslal Sahnia and Commercial Steel Limited, which state that the existence of an alternate remedy is not an absolute bar to the maintainability of a writ petition under Article 226. The court found that the case involved a violation of the principles of natural justice and thus fell within the exceptions allowing for writ jurisdiction.

4. Principles of natural justice:
The court determined that the notice issued under Section 148 without following the procedure under Section 148A violated the principles of natural justice. The assessment order was passed without providing the petitioner with the necessary information and material relied upon by the Revenue, further violating natural justice principles.

Conclusion:
The writ petition was allowed, and the assessment order dated 30.03.2022 was set aside. The matter was remitted back to the respondents to decide the case afresh, treating the notice issued under Section 148 as a notice under Section 148A, and to proceed in compliance with the provisions of Section 148A, considering the Supreme Court's decision in Ashish Agarwal.