Prejudices and mechanical style of working continue – while issuing notices us 148 A, Enquiry and order us 148A and then notice us 148- as per recent experience new provisions are not likely to serve purposes and roving enquiry will continue in name of reassessment.

[DEV KUMAR KOTHARI]

Prejudices and mechanical style of working continue – while issuing notices u/s 148A, Enquiry and order u/s 148A and then notice us 148- as per recent experience new provisions are not likely to serve purposes and roving enquiry will continue in name of reassessment.

Before writing about recent experience in case of proceedings for reassessment as per law w.e.f. 01.04.2021 it is considered to have a look and analysis of S.148A as under:

Provision with highlights added for analysis:

Income-tax Act, 1961

¹[Conducting inquiry, providing opportunity before issue of notice under section 148.

148A. The Assessing Officer shall, before issuing any notice under section 148,-

(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;

(b) provide an opportunity of being heard to the assessee, with the prior approval of specified authority, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);

(c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);

(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:

Provided that the provisions of this section shall not apply in a case where,-

(a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or

(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee.

Explanation.-For the purposes of this section, specified authority means the specified authority referred to in section 151.]

 ***********

NOTES:-

1. Inserted vide THE FINANCE ACT, 2021 dated 28-03-2021 w.e.f. 01-04-2021

Analysis:

Heading of section “Conducting inquiry, providing opportunity before issue of notice under section 148”

Heading of section lays emphasis and importance   to inquiry and providing opportunity, perusal of information including reply of assessee, and then only  a decision is to be taken by AO for issuing or not a notice us 148. A decision to issue notice must be reasoned and speaking order.  

Provision of ‘ with the prior approval of specified authority’ in various steps are  important aspect to ensure that un-necessary enquiry is not made and unnecessary notices are not issued which just  increases  litigation without result orientation.

On reading of entire section 148A it is found that the following mandatory steps are provided:

1. Having information with AO
2. Obtaining prior approval of specified authority.
3. Enquiry (with prior approval of prescribed authority)
4. Opportunity to assesse (with prior approval of prescribed authority)
5. Consideration of all material available including reply filed by assesse
6.  Decision about notice to be issued or not. (with prior approval of prescribed authority)
7. Issuing notice us 148 if so decided. (with prior approval of prescribed authority)

Mandatory terms:

We find that the provisions are in mandatory terms by use of word “shall” at relevant places. And particularly in beginning as follows:

    “The Assessing Officer shall, before issuing any notice under section 148,-

We also find the following  mandatory steps to be taken by the AO if he has information which suggests escapement of income in case of assessee

1. Conduct an enquiry, if required 

(On reading of entire section it is clear that enquiry is required in all cases except those which are specifically excluded by exceptions related to search and survey cases as provided in this section itself by  a proviso.)

2. provide an opportunity to assesse:

The AO is required to provide an opportunity to assessee and he is required to furnish details of information which AO is having and also result of his enquiry with the show cause notice (SCN).

3.  consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);
4.  decide, on the basis of material available on record  ….. whether or not it is a fit case to issue a notice under section 148

What should  be provided to assessee with  SCN:

When a show cause notice is issued, it must be along with:

1. the information which suggests that the income chargeable to tax has escaped assessment-  though this may be a preliminary information but some information is necessary which has link with assessment of assessee.
2. result of enquiry -having some  information is not enough.  AO is required to make an enquiry in relation to assesse vis a vis the information available with the AO.  Apparently this enquiry can relates to the assesse from records available with the department and can be in relation to Return of Income filed by assesse, other returns like return of TDS and TCS, and other reports like tax audit reports, accounts, information available in ITR, past assessment etc.

This enquiry  is intended to ensure that the AO does not issue any show cause notice in undue haste and just to issue a SCN in an attempt to quick start reassessment proceedings by issue of notice us 148.

Therefore, it is important the a SCN should be issued only after AO has examined relevant information in relation to particular year and  other related  years which can have a bearing on enquiry.

AO should not issue a notice just on having any information but will make relevant enquiry to examine whether information has a bearing on the case of assesse and whether there is a case of escapement. This can only be after considering ROI and other relevant information related to assess, as available with the I.T. Department.

              Effective date:

As per notes the new provision has been  Inserted vide THE FINANCE ACT, 2021 dated 28-03-2021 w.e.f. 01-04-2021

As per memorandum explaining proposals in the Finance Bill these amendments   vide Clauses 35 to 40 and 42 to 43]   will take effect from 1st April, 2021 .

Nowhere it is mentioned that the amendments will apply w.e.f. 01.04.2021 for initiation of reassessment proceeding for any of past years.

This is again clear from the provisions which provide exceptions in relation to search and requisitions cases where search is initiated on or after 01.04.2021. 

Therefore, these should apply only in relation to assessment year beginning on or after 01.04.2021 and cannot apply to earlier years.

Recent experience:

Recent experience shows that as in past, process for reassessment proceedings are being initiated in mechanical manner with prejudices in mind. Although approvals of Pr. CIT is obtained at various stages but the same is in mechanical manner, in undue haste, at last moments and thus without application of mind as intended under new scheme.

Order of enquiry is also made in prejudiced manner and without proper application of mind. This is clear when we notice that even additions made in original assessment us 143.3 are being repeated in reassessment.

Notice us 148 are being issued in mechanical, stereotype manner without application of mind. When as enquiry is made before issue of notice us 148, it is expected that the notice us 148 shall be issued only after due consideration of original ITR and original assessment made, if any.  Notices may indicate that original ITR and assessment was not at all considered.

Therefore, when a notice us 148 is received, one need to go through the earlier processes  - notice, reply, enquiry and order and then content of notice us 148 etc.

A suggested preliminary objection to notice us 148 is given below:

From:  XYZ Ltd  

By Email to AO on  @INCOMETAX.GOV.IN

SIR,

PAN:  xxxxxxxxxxxxxA.Y: 2018-19 Without prejudice and under protest.

Preliminary objection to notice under section 148 of the Income-tax Act,1961 VIDE DOCUMENT Dated: 30/03/2022  BEARING DIN & Notice No

We are in receipt of you notice us 148 requiring us to file a ROI in response to the notice. On perusal of the notice we submit our preliminary objections as follows:

The notice is vague and omnibus as discussed in table below:

From notice with highlights added by underlining:	Our observations:
I have the following information in your case or in the case of the person in respect of which you are assessable under the Income tax Act, 1961 (here in after referred to as "the Act") for Assessment Year 2018-19	The notice is not clear as to whether it belongs to our assessment or some other person in respect to whom you consider assesse to be assessable.
2. I, therefore, propose to assess or reassess such income or recompute the loss or the depreciation allowance or any other, allowance or deduction for the Assessment Year 2018-19 and I, hereby, require you to furnish, within 30 days from service of this notice, a return in the prescribed form of the Assessment Year 2018-19.	What you want to do is not clear because notice contains:    assess or reassess – what is really intended? assess such income or recompute the loss or the depreciation allowance or any other, allowance or deduction – no clarity is found about what you intend.

This means that the notice has been issued without considering our original ROI and processing thereof / and orders passed us 143.3 / or intimation issued us/ 143.1  and decisions taken thereon as to issue or not to issue  notices us 143.2 and 142 in respect of our original ITR filed on …..

In this case an order  under sub-section (d) of section 148A of the Act has been passed, still the notice us 148 is not specific , it is vague and omnibus  type notice. This means that actions us 148A are not with open mind but only in prejudiced manner. The steps taken and followed have been taken and complied with just a merely formality of complying the new process.

 Hence the notice us 148 is invalid. Although new procedures require prior permissions of Pr. CIT, however, the same have been granted in very short time, very mechanical manner and without application of mind on assessment records and reply to show cause notice and other submissions of assessee.

The order under sub-section (d) of section 148A is also vague and based on presumptions and conjecture and ignoring reality, documents and explanations filed by us.

As submitted earlier in response to notice us 148A it appears that although  notices have been issued and steps were taken by the Ld. AO with prior permission of Pr. CIT. however all steps were taken in  hurry and without application of mind.

When a notice us 143.2 was not issued within limitation it means that a decision was taken for not issuing notice which could be issued for  very wider scope of enquiry contemplated us 143.2. Non issue of notice us 143.2 means that a  decision was taken for not scrutinizing ROI.

If there was any reason for issuing notice for scrutiny, then the AO should have issued notice as per mandatory language used that is “shall issue”

Therefore, we submit that the reassessment proceedings is based on review and change of opinion and is void.

We request you to treat our original ITR as ITR in response to notice us 148.

If so advised, we will file ROI in response to notice us 148 same as the original ITR. This will also be under protest and without prejudice.

Kindly provide a link in my account for submitting response to notice us 148. At present there is only link for filing a ROI.

Thanking you,

For  xyz LIMITED

Director, digitally signed and transmitted through email.

Request to learned readers:

Learned readers are requested to share their views on recent experience and to strengthen knowledge base.