2024 (6) TMI 693 - HC - Income Tax

Validity of reassessment orders u/s 148A(d) - reasons contained in the order(s) issued under Section 148 A(d) of the Act are different from the reasons which were stated in the notice(s) issued u/s 148 A(b) - taxability of the buyout amount and interest on short-term fixed deposit - Writ Petitions challenging the order(s) u/s 148A(d) of the Act are premature and that the legal issues arising for consideration in the assessment shall be decided by the assessing authority after detailed consideration of the appellants' argument - Primary contention of the appellants was that the reasons set out in the order(s) under Section 148 A(d) of the Act that the impugned transactions would attract Section 56 (2)(x)(a) were raised for the first time. The notice(s) issued u/s 148 A(b) of the Act proposed to tax the above receipts on the premise that it would attract capital gains - HELD THAT - Object behind issuance of notice u/s 148 A(b) of the Act is not an empty formality but is a mandatory requirement intended to put the assessee on notice of the reason on the basis of which the revenue intends to issue a notice u/s 148 of the Act. It is trite law that a notice must contain the reasons to which the noticee is required to respond. It is essential to disclose the reasons to enable the noticee to give a reply/ response, for, it is rudimentary that the noticee should be made aware of all that which influence the decision maker and which he has to meet. If the reasons which are set out in the notice to which the noticee is required to respond and the reasons contained in the order are different, the issuance of the notice would fail to serve its purpose and would be reduced to an empty formality. That means, it would neither qualify as a notice nor serve the object of issuance of notice. We are conscious that the proceedings/ order u/s 148 A(b) of the Act does not conclude the reassessment proceedings and there is still an opportunity for the assessees after issuance of notice under Section 148 to respond. However, we cannot turn a blind eye to the fact that legislature has introduced Section 148A of the Act, which is an enquiry undertaken before issuance of notice u/s 148 of the Act, and one cannot reduce the provisions under Section 148 A of the Act to an empty formality/ dead letter. The impugned orders passed under Section 148A(d) of the Act shall be treated as notice(s) under Section 148A(b) and the appellants are directed to put forth their objections within a period of six (6) weeks from the date of receipt of a copy of this judgment. If any such objections are filed, the same shall be considered and orders shall be passed on merits and in accordance with law, within a period of six weeks, after providing an opportunity of hearing to the appellants.

Summary

Issues Involved:
1. Prematurity of Writ Petitions challenging orders u/s 148A(d).
2. Difference in reasons between notices u/s 148A(b) and orders u/s 148A(d).
3. Taxability of the buyout amount and interest on short-term fixed deposit.

Summary:

1. Prematurity of Writ Petitions challenging orders u/s 148A(d):
The appellants challenged the orders u/s 148A(d) and consequential notices u/s 148 on the grounds that the writ petitions were premature. The court held that the legal issues arising for consideration in the assessment should be decided by the assessing authority after detailed consideration of the appellants' arguments. The learned Judge rejected the writ petitions, stating that the assessing officer's prima facie conclusion of income escapement was not untoward and that the matter was premature at this juncture.

2. Difference in reasons between notices u/s 148A(b) and orders u/s 148A(d):
The appellants contended that the reasons set out in the orders u/s 148A(d) were different from those in the notices u/s 148A(b), thereby denying them an opportunity to respond. The court emphasized that the object behind issuing a notice u/s 148A(b) is to put the assessee on notice of the reasons for issuing a notice u/s 148. It is essential to disclose the reasons to enable the noticee to respond. The court referred to the Supreme Court's judgment in Union of India v. Ashish Agarwal, highlighting that the procedure under Section 148A is a mandatory requirement and not an empty formality.

3. Taxability of the buyout amount and interest on short-term fixed deposit:
The impugned proceedings revolved around the liability of monies paid to the appellants pursuant to the buyout of shares in SVGML. The court noted that the Supreme Court had directed a sum of Rs. 100 crores to be paid to the appellants for the buyout of their shares, and the appellants had received Rs. 18,62,03,348/-. The assessing authority's view was that the receipt should not be treated as exempt under the Income Tax Act, and interest on the short-term fixed deposit should be taxed in the assessment year 2019-20. The court directed that the impugned orders u/s 148A(d) be treated as notices u/s 148A(b), and the appellants were given six weeks to file their objections, which should be considered on merits and in accordance with law.

Conclusion:
The court disposed of all the writ appeals, directing the appellants to file their objections within six weeks and the assessing authority to consider these objections and pass orders on merits within six weeks, providing an opportunity of hearing to the appellants. No costs were imposed, and connected miscellaneous petitions were closed.