2024 (5) TMI 1027 - HC - Income Tax

Validity of reassessment proceeding - pre-existing rule, to record 'reason to believe' - Compliance with procedural requirements u/s 148A or not? - HELD THAT - In the present facts, the 'decision' of the assessing authority to initiate reassessment proceedings in the case of the petitioner has arisen on the 'information' received that the 'purchaser' does not exist. That is contained in the reports of the Income Tax Officer with respect to the four addresses of the 'purchaser'. No direct evidence was disclosed by the petitioner, (in his reply), - to doubt the existence of that 'information'. The 'suggestion' as to escapement of income qua sales made to the (non-existing) 'purchaser', inheres in it. Thus, the 'information' is relevant to the 'suggestion' as to 'escapement of income' at the hands of the petitioner. As to the non-existence of the 'purchaser', that satisfaction further appears to have arisen on the conduct of the purchaser in not responding to any of the notices and summons issued. Third, the assessing officer has taken note, during the course of a search proceedings and upon recording of statement of a third party, it was also suggested that the 'purchaser' did not exist. Such facts had been clearly noted in the impugned order passed u/s 148A(d) of the Act. Petitioner had also pointed out that the purchaser company continues to exist and it is active on the MCA portal. As noted above, that was not a mandatory condition to be fulfilled, at this stage. Also, in absence of any obligation in law, to record a categorical finding to reject any particular objection (at this preliminary stage), no fault exists in the initiation of reassessment proceedings occasioned by an over all consideration of the 'information'/relevant material. As noted above, the 'suggestion' is clearly seen to have arisen on the own strength of the 'information'/relevant material. Thus, the subjective 'decision' that it is a 'fit case' to initiate reassessment proceedings, (notwithstanding the objection raised by the petitioner), may not be faulted. All merit objections that may be raised and the manner in which they may be raised by the assessee in response to a notice issued under Section 148A(b) of the Act are not required to be decided pointwise, at the stage of assumption of jurisdiction i.e. at the stage of order under Section 148A(d) of the Act. Strictly speaking that requirement of law did not exist even under the unamended law. Even then, as noted above, the strict test of 'reason to believe' having been done away and replaced with the more subjective and lighter test of 'suggestion' arising from the 'information' received by an assessing officer-that income may have escaped assessment, we are not inclined to lay down a stricter test (to be satisfied by the assessing authorities), while making a subjective 'decision', to initiate the reassessment proceedings. Writ petition lacks merit and is dismissed. However, the assessment proceedings may continue and be concluded strictly in accordance with law without being prejudiced by any observation made in this order.

Summary

Issues Involved:
1. Challenge to the order u/s 148A(d) of the Income Tax Act, 1961.
2. Validity of the reassessment notice u/s 148 for the Assessment Year 2020-21.
3. Compliance with procedural requirements u/s 148A.
4. Consideration of objections raised by the petitioner.

Summary:

1. Challenge to the order u/s 148A(d) of the Income Tax Act, 1961:
The petitioner challenged the order dated 27.03.2024 passed u/s 148A(d) and the consequential notice issued u/s 148 for the Assessment Year 2020-21. The petitioner had filed a regular return of income for the said year, but no scrutiny assessment was conducted. A show cause notice was issued on 19.02.2024 u/s 148A(b), proposing reassessment based on information that the petitioner had transactions with a non-existent company, M/s Everett Infra and Engineering Equipments Pvt. Ltd., involved in providing accommodation entries.

2. Validity of the reassessment notice u/s 148 for the Assessment Year 2020-21:
The petitioner responded to the show cause notice, asserting the genuineness of transactions with the purchaser and provided supporting documents. However, the Assessing Authority rejected the objections, relying on oral statements and reports from the Income Tax Department indicating the non-existence of the purchaser. The petitioner argued that the order u/s 148A(d) was non-speaking and passed without proper consideration of objections.

3. Compliance with procedural requirements u/s 148A:
The court noted that the amended statute under Section 148A does not require recording 'reason to believe' but mandates the assessing authority to 'consider the reply' submitted in response to the show cause notice. The court emphasized that the assessing authority must make a 'decision' based on the material available on record, including the assessee's reply, to determine if it is a 'fit case' for reassessment. The court found that the Assessing Authority had broadly considered the petitioner's reply and the information received, thus complying with the procedural requirements.

4. Consideration of objections raised by the petitioner:
The court observed that the Assessing Authority is not obligated to record specific reasons for rejecting each objection at the preliminary stage of reassessment proceedings. The court held that the subjective 'decision' to initiate reassessment based on the 'suggestion' of income escapement from the information received was sufficient. The court found no fault in the initiation of reassessment proceedings, noting that the petitioner's objections could be addressed during the reassessment process.

Conclusion:
The writ petition was dismissed, and the court allowed the reassessment proceedings to continue in accordance with the law. The court clarified that all merit objections/defenses remain open to the petitioner during the reassessment process. No order as to costs was made.