2024 (11) TMI 276 - HC - Income Tax

Validity of reopening of assessment - Jurisdictional validity of the notice and order issued u/s 148, 148A(b), and 148A(d) - Application of mind by the specified authority in granting sanction for reopening the assessment or not? - petitioner did not submit the bank statement of the relevant time period, when the fixed deposit was initiated and the source of the amount which was used for investment in the fixed deposit was not submitted. HELD THAT - As specified authority has failed to consider the notice issued u/s 148A (b) of the Act, in its proper perspective vis-a-vis the information made available from the inside portal in relation to the reply filed by the petitioner, placing on record the details of the fixed deposits of the petitioners with the HSBC Bank for the year under consideration, which is reflected from the bank statements of the HSBC Bank placed on record. It is submitted that the clumsy attempt is made by the specified authority to justify granting sanction to reopen the case. On perusal of the contents of the affidavits, it is clear that when the sanction was granted, there was no application of mind on the part of the specified authority and mechanical sanction was granted without referring to the documents and thereafter when the specified authority was called upon to justify the action of the sanction further details are placed on record which cannot be considered at this stage, as we are examining the validity of the impugned action i.e. passing of the order under Section 148A (d) and issuance of the notice under Section 148 to assume the jurisdiction by the respondent Assessing Officer to come to the conclusion that it is a fit case to reopen the assessment or not. Therefore, on perusal of the show-cause notice and the impugned order under Section 148A (d) of the Act, it clearly shows that the assessee has shown the details of the amount as stated in the notice and the order being the investment made by the petitioners since 2013, and therefore there is no question of any escapement of income on face of the impugned notice and order, which would give a jurisdiction to the Assessing Officer to reopen the assessment for the year under consideration.There is no other information disclosed in the show-cause notice either under Section 148A (a) or 148B. AO has stated following false facts without taking into consideration the reply of the assessee, which ought to have been considered as provided under Section 148A (d) of the Act as such order is required to be passed after considering the reply filed by the assessee. Thus we are of the opinion that the impugned order under Section 148A (d) and notice under Section 148A (b) of the Act are passed without jurisdiction as the Assessing Officer has failed to take into consideration the above facts. The petition is accordingly allowed.

Summary

Issues Involved:

1. Jurisdiction and validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Consideration of evidence and procedural fairness in the issuance of the notice under Sections 148A (b) and 148A (d).
3. Application of mind and mechanical sanction by the specified authority.

Detailed Analysis:

1. Jurisdiction and Validity of Notice under Section 148:

The primary issue in the judgment concerns the jurisdiction and validity of the notice issued under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2017-18. The petitioners, who are British citizens residing in India, challenged the notice on the grounds that there was no escapement of income. They argued that the amount in question, Rs. 1,21,92,914/-, was an investment made from past remittances and was exempt under Section 10(4) of the Act. The court found that the foundational facts cited in the notice were incorrect, as the petitioners had provided detailed documentation explaining the source of the funds and their investment history since 2013. The court concluded that the notice was issued without jurisdiction, as there was no evidence of income escapement.

2. Consideration of Evidence and Procedural Fairness:

The court examined whether the respondent authorities had duly considered the evidence and followed procedural fairness. The petitioners contended that the Assessing Officer issued the order under Section 148A (d) without considering their detailed replies and the supporting documents. The court noted that the petitioners had submitted bank statements and other evidence showing the continuity of their investments. However, the Assessing Officer failed to acknowledge these documents and erroneously claimed that the petitioners did not provide necessary bank statements. The court determined that the procedural requirements under Section 148A (d) were not met, as the Assessing Officer did not adequately consider the petitioners' submissions, leading to an unjustified reopening of the assessment.

3. Application of Mind and Mechanical Sanction by Specified Authority:

Another critical issue was the alleged mechanical sanction granted by the specified authority, namely the Chief Commissioner of Income Tax, without proper application of mind. The petitioners argued that the specified authority approved the reopening of the assessment without considering the detailed replies and evidence provided by them. The court found that the specified authority failed to apply its mind to the facts and circumstances of the case, as evidenced by the affidavits filed. The affidavits revealed that the authority did not consider the petitioners' submissions about their NRE account transactions and investment history. The court concluded that the sanction was granted mechanically, without due consideration of the relevant facts, rendering the notice and order under Sections 148A (b) and 148A (d) invalid.

Conclusion:

The court allowed the petition, quashing the impugned order under Section 148A (d) and the notice under Section 148A (b) of the Income Tax Act. The court held that the Assessing Officer acted without jurisdiction, as there was no escapement of income, and the specified authority granted mechanical sanction without considering the petitioners' evidence. The rule was made absolute to the extent of setting aside the impugned order and notice, with no order as to costs.