2022 (6) TMI 694 - HC - Income Tax

Reopening of assessment u/s 147 - gross violation of principles of natural justice - Assessee argued for non-supply of documents and details not being afforded with an opportunity of cross-examination of the concerned person etc - HELD THAT - AO has concluded the assessment proceedings solely based upon the information which was available before the commission stated to have been furnished by Wadhwa Group. Admittedly, the assessee was not a party to the proceedings before the Settlement Commission. That apart, while issuing the notice under Section 148, in the annexures contained therein, this information was not disclosed. AO sought to reopen the assessment proceedings based upon the information obtained from JCIT(OSD), Central Circle 5(4), Mumbai which admittedly is a third party information. It is no doubt true that the assessing officer would state that he has analysed the information and made certain inquiries thereon. However, the fact remains that the request made by the assessee for supply of details and documents was not complied with. The reasons given by the assessing officer that the entire information pertaining to the search and seizure of the portion of Wadhwa Group cannot be furnished to the assessee. AO may be justified in coming to such conclusion. Nevertheless, if a portion of the information obtained from Wadhwa Group or certain findings rendered by the Settlement Commission concerning the assessee, that portion of the information ought to have been furnished. Nonfurnishing of such information which is relevant information would render the proceedings in violation of principles of natural justice. We agree with the findings of the learned Single Judge that the court cannot decide the correctness of the decision of the assessing officer but would be well-justified in examining as to whether there is any error in the decision making process. We have no hesitation to hold that there has been gross violation of principles of natural justice in the decision making process rendering the entire proceedings to be not sustainable. Therefore, we are inclined to interfere with the order passed by the assessing officer. For all the above reasons, the appeal is allowed and the order passed in the writ petition is set aside.We make it clear that the entire information concerning the Wadhwa Group are not required to be furnished to the assessee but that part of the information relevant to the assessee has to be furnished including the findings rendered by the Settlement Commission qua the assessee.

Summary

Issues:
Challenge to order under Section 148 of the Income Tax Act, 1961; Violation of principles of natural justice; Procedural irregularity in reassessment proceedings.

Analysis:
The appellant filed a writ petition challenging a notice dated March 31, 2021 under Section 148 of the Income Tax Act, 1961, seeking various reliefs including rescinding the notice and penalty demand. The Single Judge dismissed the petition, stating it was an appealable order and no procedural illegality existed. The appellant appealed, arguing the lack of reasons for the dismissal and violation of natural justice. The proceedings began with the notice under Section 148, detailing information collected by the assessing officer. The appellant raised objections, requesting specific details and documents, which were not provided. The assessing officer proceeded with the reassessment without fulfilling the appellant's requests, leading to a lack of natural justice. The Court found a gross violation of natural justice in the decision-making process, rendering the proceedings unsustainable.

The Court held that the assessing officer's failure to provide relevant information to the appellant, despite requests, constituted a violation of natural justice. The appellant's objections and requests for specific details were ignored, leading to an unfair assessment process. The Court emphasized the importance of ensuring procedural fairness and the right to be heard in such matters. The decision to remand the matter to the assessing officer for a fresh decision was based on the need to rectify the procedural irregularities and provide the appellant with the necessary information for a fair assessment process.

The Court directed the assessing officer to furnish relevant details and documents sought by the appellant, ensuring a fair and transparent assessment process. While acknowledging that not all information concerning the Wadhwa Group needed to be disclosed, the Court emphasized the importance of providing information relevant to the appellant's case. Additionally, the Court ordered the assessing officer to allow the appellant to cross-examine relevant individuals involved in the case, ensuring a thorough and just assessment process. The Court's decision aimed to rectify the procedural irregularities and uphold the principles of natural justice in the reassessment proceedings.