2022 (10) TMI 549 - HC - Income Tax

Reopening of assessment - notice u/s 148 A(b) - monetary limit of amount of income alleged to be escaped - period as granted is less than seven days as prescribed by Section 148A(b) - unexplained cash deposits - HELD THAT - The petitioner has responded to the notice by his reply dated 29.03.2022. Alongwith the reply, copy of the registered sale deed dated 03.02.2015 indicating that it was his daughter who had purchased the immovable property therein was supplied. The petitioner s daughter is separately assessed for tax. The name of the petitioner is mentioned as special power of attorney holder for his daughter. The registered sale deed clearly indicates that the petitioner is not the purchaser of the immovable property mentioned therein but it is his daughter, a separate assessee. The amount of consideration mentioned is Rs.40,00,000/- and it is stated that the purchaser had availed housing loan for the same. On a bare perusal of the registered sale deed, it becomes evident that the petitioner is not the purchaser of the said property as stated in the notice issued under Section 148A (b) of the Act of 1961. Despite supplying copy of the registered sale deed to the AO, it has not been taken into consideration by him before passing the order under Section 148A(d) of the Act of 1961. The same thus clearly indicates lack of application of judicious mind to the material on record. The amount of Rs.40,00,000/- as mentioned in the notice issued on 23.03.2022 u/s 148A(b) thus deserves to be excluded from consideration. As regards deposit of cash petitioner denied having deposited the aforesaid amount in his bank account. The material/source of information was not supplied to the petitioner. Be that as it may, even if the amount of Rs.40,00,000/- as mentioned in the notice dated 23.03.2022 is excluded from consideration for the reason that the petitioner is not the purchaser of the property in question, the amount remaining for consideration is Rs.20,71,500/- and Rs.16,20,000/- thus totaling Rs.36,91,500/-. In this regard, if the provisions of Section 149(1)(b) of the Act of 1961 are considered, it is seen that only if the amount in question that is likely to have escaped assessment is Rs.50,00,000/- or more, the time limit for issuing notice to re-open the assessment is three years but less than ten years. Thus if the income that is likely to escape assessment is only Rs.36,91,500/- after excluding the amount of Rs.40,00,000/-, it is clear that the proceedings are not liable to be re-opened as the amount involved is less than the one contemplated u/s 149(1)(b) of the Act of 1961 and the same pertains to Assessment Year 2015-16. The notice under Section 148(b) is dated 23.03.2022 which is beyond the permissible period of three years. On this count, a case for interference has been made out. It would be futile to require the petitioner to face proceedings under Section 148 of the Act of 1961. The material on record that was placed before the AO warranted consideration especially in the light of the fact that the document relied was a registered sale deed. If the amount of Rs.40,00,000/- mentioned therein is excluded from consideration, the notice as issued on 23.03.2022 falls foul of the provisions of Section 149(1)(b) of the Act of 1961. Hence for this reason, we do not find that the petitioner should be required to further contest the proceedings under Section 148 of the Act of 1961. The order passed under Section 148 A(d) as well as notice issued under Section 148 are quashed and set aside. Decided in favour of assessee.

Summary

Issues:
Challenge to order under Section 148A(d) of the Income Tax Act, 1961.

Analysis:
1. The petitioner, an individual assessee, challenged an order dated 31.03.2022 under Section 148A(d) of the Income Tax Act, 1961, regarding alleged income escaping assessment for the Assessment Year 2015-16.
2. The petitioner argued that he was not the purchaser of a property mentioned in the notice, providing a registered sale deed showing his daughter as the purchaser and him as the special power of attorney holder. The Assessing Officer failed to consider this evidence.
3. The petitioner also denied depositing a specific amount in his bank account, requesting the source of information for the notice issued. Even after excluding the disputed amounts, the remaining income was below the threshold for reopening assessment under Section 149(1)(b) of the Act.
4. The High Court found that the Assessing Officer did not apply a judicious mind by ignoring crucial evidence, leading to a lack of justification for reopening the assessment. The notice issued exceeded the permissible period under Section 149(1)(b) of the Act.
5. Consequently, the High Court quashed the order under Section 148A(d) of the Income Tax Act, 1961, and the notice issued under Section 148, relieving the petitioner from further contesting the proceedings under Section 148.

This detailed analysis showcases how the High Court considered the evidence, legal provisions, and the Assessing Officer's actions to arrive at the decision to quash the order and notice in favor of the petitioner.