2025 (3) TMI 50 - HC - Income Tax

Reopening of assessment u/s 147 - reasons to believe - relaince on information collected by virtue of the procedure prescribed under the scheme notified u/s 135A - cash deposit is unverified on account of the assessee having failed to submit any valid justification or satisfactory documentary evidences for the same - HELD THAT - While issuing the impugned notice u/s 148 the respondents by pure inadvertence have annexed/attached the information pertaining to some other individual/assessee and not the petitioner. The said aspect appears to be an error or mistake and neither deliberate nor wilful. On account of such error/mistake or inadvertence no fatality can be said to attach to the issuance of the impugned notice u/s 148 of the Act. However at the same time the passing of the impugned order dated 03.02.2025 is absolutely unsustainable in overlooking the error apparent on the face of the record. It can be safely presumed that the authority did not apply its mind to the objections raised by the petitioner. We are of the considered opinion that the impugned notice issued u/s 148 to the extent that it reflects information of some other person shall be rectified by the respondents. The appropriate and correct information available on the Insight Portal as also the Approval accorded by the Specified Authority alongwith the relevant information shall be made available to the petitioner within a week from date to enable him to file his reply/objections which may be considered strictly in accordance with law.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

• Whether the issuance of the impugned notice under section 148 of the Income Tax Act, 1961, was valid given the procedural errors alleged by the petitioner.
• Whether the respondents were justified in bypassing the procedure prescribed under section 148A of the Act based on the information collected under section 135A.
• Whether the inadvertent annexation of information pertaining to another assessee invalidates the notice and subsequent order.
• Whether the impugned order dated 03.02.2025, disposing of the petitioner's objections, was sustainable in light of the procedural errors.
• The applicability of section 292B of the Act in rectifying procedural defects in the notice issued under section 148.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of the Notice under Section 148

The legal framework involves section 148 of the Income Tax Act, which allows the reopening of assessments if income has escaped assessment. The petitioner argued that the notice was issued based on incorrect information pertaining to another assessee, thereby vitiating the notice. The court examined the procedural compliance, noting that the information on the Insight Portal pertained to the petitioner, but the annexation error was inadvertent.

The court found that the notice was not invalidated by the annexation error, as the substance of the notice was in conformity with the Act's intent, supported by section 292B, which allows for rectification of procedural defects.

2. Bypassing Section 148A Procedures

The respondents justified bypassing section 148A procedures by relying on Explanation 1(iv) to section 148, which permits direct issuance of notice when information is gathered under section 135A. The court acknowledged this exception, noting that the respondents acted within their rights under the statute to issue the notice without following section 148A procedures.

3. Inadvertent Annexation of Incorrect Information

The petitioner emphasized the error of annexing another assessee's information as a ground for invalidating the notice and order. The court recognized this as a procedural error but not one that invalidated the notice under section 148. The court directed the respondents to rectify the error by providing the correct information to the petitioner.

4. Sustainability of the Impugned Order

The court found the impugned order dated 03.02.2025 unsustainable, as it overlooked the apparent error. The court concluded that the authority failed to apply its mind to the petitioner's objections, warranting the quashing of the order.

5. Application of Section 292B

Section 292B was pivotal in the court's decision to uphold the notice despite procedural errors. This provision prevents invalidation of notices due to mistakes if the notice is substantively in line with the Act's purpose. The court applied this to save the notice but not the impugned order.

SIGNIFICANT HOLDINGS

The court held that:

• The impugned notice under section 148 was valid despite procedural errors, as the substance conformed to the Act's intent, supported by section 292B.
• The impugned order dated 03.02.2025 was quashed due to the authority's failure to consider the petitioner's objections adequately.
• The respondents were directed to rectify the procedural error by providing the correct information to the petitioner, enabling a proper response.
• The court partially allowed the writ petition, directing the respondents to complete procedures in accordance with the law.

In conclusion, while the procedural errors were acknowledged, they did not invalidate the notice under section 148, but they did affect the sustainability of the impugned order. The court's decision reflects a balance between procedural compliance and substantive justice under the Income Tax Act.