2022 (10) TMI 297 - HC - Income Tax

Validity of reopening of assessment - monetary requirement for reopening assessment - unexplained cash credit under Section 68 - HELD THAT - This Court is of the view that the condition precedent of an asset in the form of Rs.50 lakhs is not be attracted to the present case, as the notice under Section 148A(b) of the Act had been issued on 17th March, 2022 i.e. within three years of the assessment year sought to be assessed, namely, 2018-19 and Section 148A(d) order as well as Section 148 notice issued on 31st March, 2022 was within prescribed time. The said Section 148 notice and the order passed under Section 148A(d) were set aside by this Court on the petition of the assessee vide order dated 27th May, 2022 and the matter was remanded to the AO to decide the matter in time bound manner. The impugned Section 148 notice dated 23rd July, 2022 has been passed by the Assessing Officer within the time granted by the Court and, therefore, the said notice cannot be considered time barred as sought to be alleged by the Petitioner. This Court is of the view that the issue whether the transaction was executed by the Petitioner with Nitin Trading Company, a proprietorship of Mr. Aman Bhalla or Mr. Dev Narayan, cannot be adjudicated upon in writ proceedings and that too, when the assessment proceedings are pending. This Court is also of the view that if the allegations in the order passed under Section 148A(d) of the Act are correct, then the Petitioner s defence that the transaction had already been subjected to tax is not correct inasmuch as the sale would be treated as unexplained cash credit under Section 68 of the Act and the full value would be liable to tax. The fact that a scrutiny assessment had been undertaken in the present case would not come to the Petitioner s rescue, as the Respondents had subsequently recieved information that one of the parties with whom the Petitioner had transacted was an alleged entry operator-which fact was not known to the revenue when the scrutiny assessment was carried out. WP dismissed.

Summary

Issues:
Challenge to order under Section 148A(d) of the Income Tax Act, 1961 and notice under Section 148 for Assessment Year 2018-19.

Analysis:
1. The petitioner filed a writ petition challenging the order under Section 148A(d) and the notice under Section 148 of the Income Tax Act, 1961, both dated 23rd July, 2022, for the Assessment Year 2018-19.
2. The petitioner argued that the monetary requirement for reopening the assessment was not met as the amount sought to be added to the petitioner's income was less than the required Rs.50 lakhs.
3. It was contended that the respondents intended to initiate reassessment based on incorrect facts, alleging bogus sales to a specific individual, whereas the petitioner had actually sold products to a different entity.
4. The petitioner highlighted that all sales and records had been verified and accepted in the original scrutiny assessment, and the proceeds had been offered for tax, thus should not be considered unexplained cash credit under Section 68 of the Act.
5. The court noted that the notice under Section 148A(b) was issued within three years of the assessment year and subsequent orders were passed within the prescribed time, rejecting the petitioner's claim of being time-barred.
6. The court held that the issue of the transaction party could not be decided in writ proceedings while assessment proceedings were ongoing.
7. It was observed that if the allegations in the order were correct, the petitioner's defense that the transaction had already been taxed would not hold as it could be treated as unexplained cash credit under Section 68.
8. The court stated that even though a scrutiny assessment had been conducted, new information about a party being an alleged entry operator came to light, which was not known during the initial assessment.
9. The writ petition was dismissed, but the petitioner was allowed to present all contentions before the Assessing Officer for consideration.
10. The Assessing Officer was directed to decide the matter on its merits following the law.

This detailed analysis covers the issues involved in the legal judgment comprehensively, addressing the arguments presented by the petitioner and the court's reasoning in dismissing the writ petition while providing insights into the legal provisions and factual considerations.