2022 (9) TMI 930 - HC - Income Tax

Reopening of assessment u/s 147/148 - Information received about undisclosed Crypto currency - AO observed that, bank transactions alone are not sufficient to verify the trade in Crypto currency - HELD THAT - The impugned order as it reads shows that the authority has recorded a finding that the material evidence to verify the transaction regarding Crypto currency is not placed on record. Even in this petition, the petitioner has not submitted the concerned ledger statements relating to trade in Crypto currency. We find considerable force in the submission of revenue that bank transactions alone are not sufficient to verify the trade in Crypto currency rather, the assessee ought to have submitted before the authority the relevant ledger statement evidencing that he had entered into trade of Crypto currency in the manner as has been asserted by him by way of the information stated by him. Whether it was the volume of the trade which is reflected in the total amount or it was an investment made in the Crypto currency without any withdrawal therefrom would essentially be a matter for consideration upon perusal of the Crypto currency ledger. May be because of this reason, the authority was of the view that the information regarding trade in Crypto currency is not verified. The authority has considered, though in brief, the reply of the petitioner at this stage only for the purpose of deciding whether proceedings u/s 148 should be drawn. In our considered opinion, the exercise which has been undertaken by the authority fulfilled the legal requirement of Section 148(A). Even now it would be open for the assessee to satisfy the authority by submitting the relevant Crypto currency ledger to verify the information as was submitted by him before the Assessing Officer in proceedings under Section 148A of the Act, 1961. We are not inclined to interfere with the order as we do not find that the order is either perverse or lacks jurisdiction so as to warrant interference by this court in exercise of writ jurisdiction.

Summary

Issues:
Challenge to impugned order under Section 148A of the Income Tax Act, 1961 for reopening assessment proceedings for the assessment year 2018-2019.

Analysis:
The petitioner challenged the order dated 31.03.2022 passed by the Assessing Authority under Section 148A of the Income Tax Act, 1961, leading to the issuance of a notice under Section 148 for reopening assessment proceedings for the assessment year 2018-2019. The petitioner submitted a detailed reply justifying the transactions related to Crypto currency, claiming that the volume of transactions did not represent the investment amount. The Assessing Officer was not satisfied with the reply, stating that the investment amount was not supported by relevant documentary evidence. The order under Section 148A(d) of the IT Act was passed, leading to the issuance of a notice under Section 148, which was not challenged by the petitioner.

The principal contention of the petitioner was that the impugned order did not consider the reply submitted and mechanically rejected the objection. The petitioner argued that the order was cryptic, vague, and perverse, as it did not acknowledge the documentary evidence submitted, including bank statements and income tax return acknowledgments. The petitioner claimed that the source of investment was wrongly labeled as unverified, despite submitting bank transaction statements. The revenue's counsel argued that credible information revealed a significant investment in Crypto currency by the petitioner, which remained unverified due to the absence of ledger account records related to Crypto currency transactions.

The court analyzed the statutory scheme of Section 148A of the Act, 1961, requiring an inquiry before initiating proceedings under Section 148. The court emphasized that the authority must base its decision on material available on record, especially regarding the suggestion that income chargeable to tax has escaped assessment. The court noted that the petitioner did not submit ledger statements related to Crypto currency trading. While the authority briefly considered the petitioner's reply, the court found that the legal requirements of Section 148A were fulfilled. The court stated that the petitioner could still submit relevant Crypto currency ledger to verify the information provided during the proceedings under Section 148A.

Ultimately, the court declined to interfere with the order, finding it neither perverse nor lacking jurisdiction. The petitioner was granted liberty to submit appropriate documentary evidence to support the information in Section 148 proceedings. Consequently, the petition was dismissed.