2024 (5) TMI 105 - HC - Income Tax

Validity of reopening of assessment - During the pendency of first reassessment proceedings, Petitioner received another notice u/s 148A(b) once again, alleging escapement of income - HELD THAT - In absence of information in the notice issued u/s 148A(b) of the Act with regard to the first two items mentioned in the order u/s 148A(d) of the Act i.e., (i), Purchase of shares by related PAN of penny stock of EML and GBFL Limited and (ii) Sale of shares by related PAN of penny stock of EML and GBFL Ltd and the fact that assessment orders have already been passed with regard to those two items and item 2 includes item 1 mentioned above, also clearly indicates total non-application of mind by the Assessing Officer ( AO ) as also by the Principal Chief Commissioner of Income Tax ( PCCIT ), who has granted the approval u/s 151. Such an order has been passed without referring to first two items in the notice that was issued under Section 148A(b) of the Act. Decided in favour of assessee.

Summary

Issues Involved:
1. Reopening of assessment u/s 148 for AY 2016-17 based on alleged escapement of income from sale and purchase of shares of Penny Stock Company/shell companies.
2. Validity of second notice under Section 148A(b) alleging escapement of income during the pendency of reassessment proceedings.

For the first issue, the Petitioner, a non-filer of income tax return, received a notice u/s 148 of the Income Tax Act, 1961, for AY 2016-17, regarding alleged escapement of income from share transactions. The Assessing Officer found the Petitioner's submissions inadequate as supporting documents were not provided to substantiate claims. The AO concluded that income chargeable to tax had escaped assessment. Subsequently, an assessment order was passed under Section 147 read with Section 144B of the Act, which was challenged in an appeal before the CIT(A).

Regarding the second issue, during the ongoing reassessment proceedings, the Petitioner received a second notice under Section 148A(b) alleging escapement of income. The notice referred to transactions involving purchase and sale of shares, along with fictitious LTCG benefit by manipulation in share price. However, the notice lacked specific details on how income had escaped assessment and failed to address the duplication of information already covered in the previous reassessment order. The AO's decision to proceed with the reassessment without considering the information in the notice under Section 148A(b) was deemed to be a total non-application of mind. Consequently, the High Court quashed and set aside the impugned order dated 24th March 2023, along with the order passed under Section 148 of the Act.