2022 (5) TMI 550 - HC - Income Tax

Reopening of assessment u/s 147 - Notice under Section 148 issued on the basis of information that the petitioner has deposited a sum in bank account during the assessment year 2017-18 - objection of the petitioner was rejected by the National Faceless Assessment Centre, Delhi observing that the petitioner-assessee has deposited cash in his bank account which has not been disclosed by him in his return of income and thus, reasons recorded by the assessing officer are crystal clear in the light of the strong evidences which came to the notice of the assessing officer - HELD THAT - The entire proceeding under Section 148 of the Act, 1961 have been initiated by the respondents on the basis of an anonymous letter in which also the petitioner has not been named and instead one Vishwanath Singh Katiyar @ Munnu Bhaiya owner of M/S S.R. Cold Storage has been named. Even in his verification report, the respondents have found that the information relates to M/S S.R. Cold Storage. There was absolutely no evidence that the petitioner has deposited cash of Rs. 12,50,14,500/- in his bank account during the assessment year 2017-18. Perusal of the impugned re-assessment order dated 29.3.2022 passed by the National Faceless Assessment Centre, Delhi also completely affirms that position that there was absolutely no information against the petitioner regarding cash deposit by him in his bank account. The petitioner is a cold storage company in which business dealings are mainly with farmers who usually transact in cash. The total cash deposit as has been taken in the impugned reassessment order, was fully disclosed by the petitioner-assessee in his books of account and in the audited balance sheet filed along with the return. Thus, there was absolutely no material before the assessing authority for initiating proceedings under Section 148 of the Act, 1961 and the reasons to believe recorded by the respondents were totally unfounded. The manner in which the proceedings under Section 148 of the Act, 1961 has been initiated against the petitioner, prima facie, reflects illegal and arbitrary approach of the respondents on one hand and on the other hand to cause harassment to the petitioner/assessee. - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 and subsequent orders, Amendment application for quashing re-assessment order, Allegations of misleading information by respondents, Illegal and arbitrary initiation of proceedings, Stay on the effect of the re-assessment order.

Analysis:
The petitioner initially sought relief to quash a notice under Section 148 of the Income Tax Act, 1961, an order rejecting objections, and an approval order. Through an amendment application, the petitioner requested to quash a re-assessment order dated 29.3.2022. The petitioner, a private limited company, had filed its return of income for the assessment year 2017-18, disclosing a loss. The notice under Section 148 was based on an alleged cash deposit in the bank account, which the petitioner disputed. The objection was rejected, leading to the initiation of re-assessment proceedings. The National Faceless Assessment Centre approved the re-assessment order, alleging undeclared cash deposits. However, evidence presented indicated the cash deposit related to another entity, not the petitioner.

The respondent no. 2's instructions were deemed misleading, attempting to mislead the court by not addressing crucial information discrepancies. The initiation of proceedings against the petitioner was considered illegal and arbitrary, causing harassment. The petitioner, a cold storage company, primarily transacting in cash with farmers, had disclosed all cash deposits in its books and balance sheet. The reasons for initiating proceedings were found to be baseless, lacking evidence against the petitioner.

In response, the court granted the respondents time to file a counter affidavit and the petitioner to file a rejoinder. The court scheduled further hearings and stayed the effect of the re-assessment order dated 29.3.2022. The judgment highlighted the need for a fair and evidence-based approach in tax proceedings to prevent unjust harassment and arbitrary actions against taxpayers.