2024 (9) TMI 294 - HC - Income Tax

Validity of reassessment proceedings - non consideration of the petitioner's objection - non disclosure of basis of arriving at unexplained credit - HELD THAT - The impugned order insofar as it does not disclose the basis of arriving at unexplained credit suffers from non disclosure of reason which prompted the invocation of Section 148-A of the Act and the same has resulted in denial of opportunity to the petitioner to put forthwith his explanation. As it was held in the judgment referred supra, the procedures being contemplated under Section 148-A of the Act is not an empty formality. As the petitioner requested for an opportunity to submit his objection in person which was not considered by the respondents, this Court is inclined to set aside the impugned proceedings and direct the respondents to pass orders, after disclosing the basis on which the notice was issued stating that a sum represents the unexplained credit, in accordance with law and affording an opportunity of personal hearing to the petitioner. Assessee appeal allowed.

Issues Involved:
1. Consideration of the petitioner's objection.
2. Opportunity for personal hearing.
3. Disclosure of details forming the basis of the notice under Section 148-A(b).

Issue-wise Detailed Analysis:

1. Consideration of the Petitioner's Objection:
The petitioner challenged the impugned order dated 30.04.2024, arguing that his objection dated 25.04.2024 was not considered in its proper perspective. The court noted that the petitioner's reply included details about receiving a loan of Rs. 34,25,000/- from a family friend, Robert Francis Sahayam, through proper banking channels. Despite this, the impugned order under Section 148-A(d) of the Income Tax Act was passed, stating that the petitioner had not filed a return for the assessment year 2020-2021 and that the said Robert Francis Sahayam did not qualify as a "relative" under Section 2(41) of the Act. Consequently, the reply was not accepted.

2. Opportunity for Personal Hearing:
The petitioner also argued that he was not given an opportunity to explain his objection in person. The court highlighted that the department's circular dated 01.08.2022 explicitly provides for personal hearings if requested. The court referenced multiple Supreme Court judgments, emphasizing that circulars issued by the department are binding unless withdrawn. The court concluded that the petitioner's request for a personal hearing, which was not considered by the respondents, warranted setting aside the impugned proceedings.

3. Disclosure of Details Forming the Basis of the Notice:
Another significant issue raised by the petitioner was the non-disclosure of details based on which the notice under Section 148-A(b) was issued. The court referred to the Supreme Court's judgment in Union of India Vs. Ashish Agarwal, which explained the purpose of Section 148-A as ensuring that the assessee is informed of the reasons for the notice. The court noted that the impugned order failed to disclose the basis for determining the unexplained credit of Rs. 40,25,000/-, thereby denying the petitioner an opportunity to provide a proper explanation. The court emphasized that the procedures under Section 148-A are not mere formalities but mandatory requirements.

Conclusion:
The court concluded that the impugned order and subsequent notice issued under Section 148-A(d) and Section 148 of the Income Tax Act, respectively, were premature and lacked proper consideration of the petitioner's objections, the opportunity for a personal hearing, and disclosure of the basis for the notice. Therefore, the court set aside the impugned proceedings and directed the respondents to pass orders in accordance with the law, after disclosing the basis of the notice and affording a reasonable opportunity for a personal hearing to the petitioner within eight weeks. No costs were imposed, and connected miscellaneous petitions were closed.

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