2023 (3) TMI 482 - HC - Income Tax

Validity of order passed u/s 148A(d) and the consequential notice u/s 148 - deduction u/s 54F - audit objection relied upon - HELD THAT - Briefly, in the order passed in the said writ petition, we have taken note of the fact that the expression any audit objection was introduced only via Finance Act, 2022 albeit w.e.f. 01.04.2022. Prior to the said amendment, the expression which obtained in Explanation 1(ii) appended to Section 148 of the Act adverted to the Comptroller and Auditor General of India . We are, prima facie, also of the view that if the AO, according to the respondents/revenue, had committed an error in law, perhaps, they could have taken recourse, at the appropriate time, to the provision of Section 263. We are of the view that the matter requires examination. Issue notice.Mr Agarwal accepts notice on behalf of the respondents/revenue.

Summary

Issues:
Challenge to order under Section 148A(d) and consequential notice under Section 148 of the Income Tax Act, 1961; Challenge to notice issued under Section 148A(b) of the Act; Assessment Year (AY) 2015-16; Claim of exemption under Section 54F of the Act; Flawed reassessment proceedings based on internal audit objection; Dispute over deduction claimed under Section 54F; Requirement for claiming deduction under Section 54F; Introduction of audit objection via Finance Act, 2022; Error in law committed by Assessing Officer in initial assessment; Examination of the matter required.

Detailed Analysis:
- The writ petition challenges the order under Section 148A(d) and the notice under Section 148 of the Income Tax Act, 1961, along with a notice issued under Section 148A(b) for AY 2015-16.
- The petitioner sold shares, claimed exemption under Section 54F, and faced queries regarding the deduction claimed under Section 54F during assessment proceedings.
- The petitioner responded to queries, provided details of capital gains and exemption claimed, along with evidence of investment in a residential property under Section 54F.
- The petitioner's husband was involved in the transaction, which was previously accepted after scrutiny by the Assessing Officer.
- The petitioner argued that reassessment proceedings were flawed as they were based on an internal audit objection and lacked disclosure of material facts.
- The respondents contested the petitioner's claims, stating that the deduction under Section 54F was not viable due to the absence of a sale deed and highlighted errors in the initial assessment.
- The issue of audit objection and the amendment introduced via Finance Act, 2022, was also noted, indicating a need for further examination.
- The court accepted notice on behalf of the respondents and directed the filing of counter-affidavits and set the next hearing date.
- The operation of the impugned order and notices was stayed pending further court directions, emphasizing the need for a detailed examination of the matter.