2022 (6) TMI 1121 - HC - Income Tax

Reopening of assessment u/s 147 - Notice after expiry period after four years - mandation of recording satisfaction by Commissioner - HELD THAT - Commissioner endorses the satisfaction on the reasons recorded by the AO, the Commissioner has to apply his mind and he cannot pass order mechanically and without having read the reasons. In this case satisfaction has been endorsed, in our view without even reading the reasons, mechanically. Reason for us to make this observation is that reason recorded by the AO contain contradictions, which if the Commissioner had bothered to read would have come to his notice and he could have taken appropriate remedial measures. As contradictions/errors in the reasons are typographical errors. We do not agree with the same, it cannot be termed as typographical error. Even the assessing officer has not applied his mind after drafting the reasons and perhaps not even read the reasons before forwarding it to the Commissioner for consideration and as noted above, if the Commissioner had also read the reasons he would have noted errors/contradiction. In paragraph No.1 which says The assessee has e-filed its Return of Income on 30/9/2012 declaring total income at Rs.42,312/-. The case was selected for scrutiny under CASS for the Assessment Year 2012-2013 and the assessment was completed under Section 143 (3) of the said Act on 12/12/2004 assessed total income at Rs.42,310/-. In the penultimate paragraph of the reasons it is recorded In this case return of income was filed but no scrutiny assessment was made and only requirement to initiate proceeding under Section 147 is reason to believe which has been recorded above. Petitioner is a company in the business of carrying on business of jewellery and bullion trade whereas in the reasons it is alleged that petition has failed to disclose truly and fully all material facts relevant to salary of which income chargeable to tax escaped assessment. Since the sanction has not been obtained satisfactorily before issuance of notice under Section 148 of the said Act as prescribed under Section 151 of the said Act, we allow the petition in terms of prayer clause (a) which reads as under (a) that this Hon'ble Court be pleased to issue writ of certiorari or a writ in the nature of certiorari or any other appropriate writ under Article 226 of the Constitution of India, calling for records pertaining to the impugned reopening notice dated 29/3/2019 issued by the Respondent No.2 (being Exhibit 'E' hereto) and after going into the validity and legality thereof to quash and set aside the same.

Summary

Issues: Impugning notice under Section 148 of the Income Tax Act, 1961 for Assessment Year 2012-2013

In this judgment by the Bombay High Court, the issue at hand was the validity of a notice dated 29/3/2019 issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2012-2013. The petitioner had challenged this notice, and an ad-interim stay had been granted by the court previously.

The Court delved into the provisions of Section 151 of the Income Tax Act, which mandates that no notice shall be issued under Section 148 after the expiry of four years from the end of the relevant Assessment Year unless the Commissioner is satisfied about the reasons recorded by the Assessing Officer. The Court emphasized that the Commissioner must apply his mind before endorsing the satisfaction on the reasons recorded by the Assessing Officer, highlighting that the satisfaction cannot be mechanical. In this case, the Court found that the satisfaction had been endorsed without proper consideration, as the reasons recorded contained contradictions that were not addressed.

The Court further noted that the errors in the reasons provided by the Assessing Officer could not be dismissed as typographical errors, as claimed by the Respondent. The Assessing Officer had not applied his mind, and the Commissioner had also failed to identify the errors and contradictions in the reasons. The Court specifically pointed out discrepancies in the information regarding the filing of the return of income and the scrutiny assessment in the reasons provided.

Additionally, the Court observed a mismatch in the allegations against the petitioner, a company engaged in the jewellery and bullion trade, and the basis on which the notice was issued related to the disclosure of material facts relevant to "salary" income. Due to the lack of satisfactory sanction obtained before issuing the notice under Section 148 as required by Section 151 of the Act, the Court allowed the petition and quashed the reopening notice dated 29/3/2019.

In conclusion, the petition was disposed of by the Court with no order as to costs, upholding the challenge against the notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2012-2013.