2024 (2) TMI 399 - HC - Income Tax

Validity of reopening of assessment u/s 147 - order passed u/s 148A(d) - reason to believe - Mandation to provide tangible material placed by AO to show that there was escapement of income from the payment of income tax - HELD THAT - In the instant case, on perusal of the impugned order in the writ petition we find that there are glaring omissions and more particularly the condition precedent for exercise of the power of reopening the assessment are conspicuously absent. Though the order passed appears to be an elaborate order, the conclusion is only in one paragraph. AO has stated that the bank statements in respect of the transactions done for the financial year 2015-16 (assessment year 2016-17) has to be mandatorily verified to examine the nature of transactions. This cannot done by the assessing officer because the proceedings initiated by the assessing officer for reopening the assessment for the assessment year 2016-17 has been quashed. Therefore, this is a glaring omission in the order impugned in the writ petition. Apart from that, the assessing officer would state that no prudent businessman will simply withdraw crores of cash from his bank account and again will deposit it at various stage. This is a personal opinion of the assessing officer. However, for the purpose of reopening an assessment there should be a tangible material placed by the assessing officer to show that there was escapement of income from the payment of income tax. This being conspicuously absent as could be seen from the annexure to the show cause notice the reopening proceedings have to be held to be bad in law. Thus the appeal and the writ petition are allowed and the order passed u/s 148A(d) and the consequential notice u/s 148 of the Act are quashed. Decided in favour of assessee.

Summary

Issues involved:
The judgment involves challenging an order passed under Section 148A(d) of the Act for the assessment year 2017-18.

Details of the judgment:

1. The appellant challenged the order passed under Section 148A(d) of the Act for the assessment year 2017-18, which was dismissed by the learned Single Bench. The appellant appealed against this decision, arguing that all issues should have been considered in the re-assessment proceedings.

2. The assessing officer sought to reopen the assessment for the year 2016-17, which was challenged in a previous case. For the assessment year 2017-18, the assessee received a notice under Section 148A(b) regarding cash deposits, interest receipts, and debenture purchases. The assessee responded, stating there was no evidence of income escapement. Despite this, an order was passed under Section 148A(d) of the Act, which was challenged in the current writ petition.

3. The court found that there were glaring omissions in the order, such as the absence of material showing income escapement. The assessing officer's personal opinions were not sufficient for reopening an assessment; tangible material was required to support the claim of income escapement.

4. The court allowed the appeal and the writ petition, quashing the order passed under Section 148A(d) of the Act for the assessment year 2017-18, along with the consequential notice under Section 148 of the Act.

This judgment highlights the importance of tangible evidence and compliance with legal requirements in reopening assessments under Section 148A of the Act.