2023 (2) TMI 756 - HC - Income Tax

Reopening of assessment u/s 147 - information in case of the petitioner was flagged on Insight Portal in accordance with the Risk Management Strategy formulated by the CBDT - non disposal of objections - HELD THAT - It is a clear violation of the requirement of principles of natural justice and also the statutory requirement under the law. The information which is furnished to the petitioner a name of a person if it can be mentioned in the order disposing of the objection categorically, there is no reason as to why the same would not have been supplied to the petitioner assessee if the said action was the result of the recorded statement and thereafter issued notice on finding a nexus between these two, the least which could be done at the end of the furnished requisite details for necessary to meet with the allegation and presents its case appropriately. In absence of basic details of the name of the persons with whom the petitioner is said to have made unexplained transaction, how is it expected to reply to the same by cropping in dark. Resultantly, we appreciate the fairness of learned advocate not stretching the case beyond the point, and also endorsing clearly that a name of the person with whom the alleged dealing was of issuance of notice had not been disclosed any information supplied to the petitioner. Resultantly, the petition is allowed by quashing and setting aside the order passed u/s 148A(d), notice issued u/s 148A(b) as well as consequential notice issued u/s 148 by respondent No.1 and consequential proceedings pursuant thereto. Let the process be undertaken stage-by-stage from where the stage was left.

Summary

Issues:
Challenge to validity and legality of notice under Section 148A(b) of the Income-Tax Act, 1961 for Assessment Year 2018-19 and rejection of objections by respondent No.1.

Analysis:
The petitioner, engaged in trading, filed income return for AY 2018-19, which was initially accepted. Subsequently, a notice under Section 148A(b) was issued, alleging an income escape of Rs.31,12,000 based on flagged information on the Insight Portal. The petitioner contested the lack of specific transaction details and the basis for the conclusion. The petitioner sought relief through a writ quashing the impugned orders and consequential actions.

The court heard arguments from both sides and examined the records. The notice under Section 148A(b) was issued after approval from CBDT, Ahmedabad, citing an income escape of Rs.31,12,2000 represented as assets, meeting the criteria under Section 149(1)(b) of the Income Tax Act. The court noted the lack of explanation or evidence from the petitioner regarding the flagged transactions, leading to a search action revealing unexplained investments with corroborative evidence.

The court found the petitioner's failure to provide adequate explanation a violation of natural justice and statutory requirements. It emphasized the necessity of providing essential details to the petitioner to respond effectively. Consequently, the court allowed the petition by setting aside the impugned orders and notices, directing the respondent to provide all necessary details, including the name of the party involved in the transactions, within a specified timeline for the petitioner to respond appropriately.

The court made the rule absolute, indicating the completion of the process as per the judgment. Additionally, it stated that a civil application was no longer relevant following the main petition's judgment.