2024 (8) TMI 824 - HC - Income Tax

Reopening of assessment - validity of notice u/s 148 - unexplained sources of SBN currency deposited during the demonetization period - HELD THAT - As in the scrutiny assessment u/s 143 (3), the issue of deposit of SBNs by the assessee during the demonetization period has been examined in detail by the Assessment Officer and the same objection is now raised by the audit party which, in our considered view, would amount to an attempt to review the same issue and consequently come within the fold of change of opinion which is not permissible in accordance with the settled position of law. As indicated earlier, we have relied upon Mangalam Publications 2024 (1) TMI 1042 - SUPREME COURT in support of the view that we take. In our opinion, it is not necessary to go into the scope and import of explanation 1 (ii) to Section 148 in the present facts and the same is left open to be examined in an appropriate case. Consequently, the petition is allowed. The impugned notice under Clause (b) of Section 148-A is quashed. Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148-A of the Income Tax Act, 1961 for escaped assessment for Assessment Year 2017-18.

Analysis:
The petitioner, a paralysed individual running a hardware and paint business, received a notice under Section 148-A(b) of the Income Tax Act, alleging escaped assessment for the Assessment Year 2017-18. Despite filing a response stating the notice was beyond the three-year limit and lacked new facts, the respondent continued the investigation. The petitioner challenged the validity of the notice in the present petition (paragraphs 2-6).

The respondent argued that the notice was issued based on an audit objection regarding cash deposits during demonetization. The amended provisions of Sections 147 to 149 were invoked, and the notice under Section 148-A was issued after due examination and application of mind. The respondent contended that the notice was valid as the income chargeable to tax exceeded Rs. 50 lakhs, justifying the three-year limitation under Section 149(1)(b) (paragraphs 7-10).

Additionally, the respondent emphasized that the case involved escapement of income, necessitating reassessment. It was argued that the petitioner had an alternate remedy to challenge any order passed under Section 148 by the Faceless Assessment Officer. The respondent highlighted the importance of preventing revenue loss and cited the support of Explanation 1(ii) of Section 148 introduced by the Finance Act 2021 (paragraphs 11-12).

The court examined Section 148 of the Income Tax Act and referred to the Supreme Court decision in Mangalam Publications v/s. Commissioner of Income Tax. It was noted that the objection raised by the Internal Audit Party constituted a review of an issue already examined during scrutiny assessment, amounting to impermissible change of opinion. The court allowed the petition, quashing the notice dated 19.03.2024 under Section 148-A(b) (paragraphs 13-20).

In conclusion, the court found the notice invalid due to the impermissible change of opinion and emphasized the importance of adhering to legal principles in reopening assessments. The court did not delve into the interpretation of Explanation 1(ii) of Section 148 in the current context, leaving it open for future examination (paragraphs 19-20).