2023 (11) TMI 1291 - HC - Income Tax

Reopening of assessment u/s 147 - foundational prerequisite of Section 148A - petitioner contended that despite absence o f any information suggesting that income chargeable to tax has escaped assessment, the impugned order under Section 148A(d) has been passed resulting in issuance of notice under Section 148 - HELD THAT - 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 AO 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. In view of the aforesaid, 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 Assessing Officer 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. Consequently, the present petition deserves to be and is hereby dismissed.

Summary

Issues Involved:

1. Legality, validity, and propriety of the notice under Section 148 of the Income Tax Act, 1961.
2. Alleged absence of information suggesting income chargeable to tax has escaped assessment.
3. Non-consideration of the reply submitted by the petitioner/assessee.
4. Lack of proper opportunity of hearing before passing the order.
5. Maintainability of the writ petition against the show-cause notice.
6. Compliance with procedural requirements under Section 148A of the Income Tax Act.
7. Jurisdictional and limitation issues concerning the notice.

Issue-wise Detailed Analysis:

1. Legality, validity, and propriety of the notice under Section 148 of the Income Tax Act, 1961:

The petitioner challenged the notice dated 31.03.2022 issued under Section 148 of the Act, seeking to reopen the assessment for the Assessment Year 2015-16. The petitioner argued that the notice and the preceding order under Section 148A(d) were illegal, without jurisdiction, arbitrary, and in violation of the principles of natural justice. The court noted that the procedure outlined in Section 148A was followed before issuing the notice under Section 148.

2. Alleged absence of information suggesting income chargeable to tax has escaped assessment:

The petitioner contended that the impugned order under Section 148A(d) was passed despite the absence of any information suggesting that income chargeable to tax had escaped assessment. The court referred to the procedure under Section 148A, which mandates an inquiry and consideration of the taxpayer's reply before issuing a notice under Section 148.

3. Non-consideration of the reply submitted by the petitioner/assessee:

The petitioner argued that the impugned order and notice were issued without considering the reply submitted by the assessee. The court emphasized that Section 148A(c) requires the Assessing Officer to consider the taxpayer's reply before deciding whether to issue a notice under Section 148.

4. Lack of proper opportunity of hearing before passing the order:

The petitioner claimed that no proper opportunity of hearing was afforded before passing the order. The court reiterated that Section 148A(b) mandates issuing a show-cause notice and providing a reasonable opportunity of being heard to the taxpayer.

5. Maintainability of the writ petition against the show-cause notice:

The respondent 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 stage and premature. The court agreed, citing the judgment in Union of India vs. Kunishetty Satyanarayan, which emphasized the availability of alternative efficacious remedies under the Income Tax Act.

6. Compliance with procedural requirements under Section 148A of the Income Tax Act:

The court detailed the procedure under Section 148A, which includes conducting an inquiry, issuing a show-cause notice, considering the taxpayer's reply, and deciding whether to issue a notice under Section 148. The court found that the Assessing Officer had followed these steps before issuing the notice under Section 148.

7. Jurisdictional and limitation issues concerning the notice:

The petitioner argued that the impugned notices were without jurisdiction and hit by limitation. The court noted that the limitation for issuing a notice under Section 148 is provided in Section 149. The court also referred to the Apex Court's judgment in Ashish Agrawal, which modified the impugned orders to treat notices issued under the unamended Section 148 as show-cause notices under Section 148A(b).

Conclusion:

The court refrained from interfering with the impugned order(s)/notice(s) at this premature stage, emphasizing that the veracity and genuineness of the material forming the opinion of the Assessing Officer should not be examined in writ jurisdiction. The petition was dismissed with liberty to the petitioner to avail the statutory alternative remedy under the Income Tax Act.