2023 (3) TMI 564 - HC - Income Tax

Reopening of assessment u/s 147 - Validity of order u/s 148A - Obligation cast upon the revenue in terms of Section 148A(b) to provide to the assessee anything beyond providing him the information - HELD THAT - In the present case admittedly, no material had been supplied to the Petitioner, notwithstanding the fact that there was material available with the AO as can be seen from the order passed by the assessing officer u/s 148A(d). This was in the shape of a statement recorded, during survey action of the partner of BGR Construction LLP. There also appears to be a sale list, which was allegedly found during the search operations containing the names of 72 investors including the Petitioner which although referred to in the order u/s 148A(d) as also in the clarification communication dated 21st March 2022 was not provided to the Petitioner. Interestingly, while the communication dated 21st March, 2022, did say that the list of total sale was being attached for the ready reference of the Petitioner for purposes of submitting a reply to the show cause notice, no such list was admittedly furnished . It goes without saying that providing information to the Petitioner, without furnishing the material based upon which the information is provided, would render an assessee handicapped in submitting an effective reply to the show cause notice, thereby rendering the purpose and spirit of Section 148A(b) totally illusive and ephemeral. The fact that the material also was required to be supplied can very well be gauged from the clear directions issued by the Supreme Court in the case of Union of India V/s. Ashish Agarwal 2022 (5) TMI 240 - SUPREME COURT Two other arguments were raised by Mr. Walve during the course of argument, pertaining to the failure on the part of the assessing officer to obtain the prior approval from the specified authority before issuing the clarification communication dated 21st March 2022, as also the fact that the assessing officer ought to have first conducted an inquiry in terms of Section 148A(a) of the Act. We do not deem it absolutely necessary to deal with these issues in the present petition. Be that as it may, we hold that the reassessment proceedings initiated are unsustainable on the the ground of violation of the procedure prescribed u/s 148A(b) of the Act on account of failure of the AO to provide the requisite material which ought to have been supplied alongwith the information in terms of the said section. Petition is allowed. The order impugned passed u/s 148A(d), the notice impugned u/s 148 of the Act are hereby quashed.

Summary

Issues Involved:
The judgment involves challenges to a notice under Section 148 of the Income Tax Act, 1961, a notice under Section 148A(b) of the Act, and an Order passed in terms of Section 148A(d) of the Act.

Challenge to Notice under Section 148 of the Act:
The Petitioner challenged the notice dated 26 March 2022 under Section 148 of the Income Tax Act, 1961, on the grounds that income liable to tax for the assessment year 2018-19 had allegedly escaped assessment. The basis for reopening was information received from credible sources regarding a transaction with BGR Construction LLP and a conveyance deed with Meet Spaces LLP. The Petitioner denied these transactions and demanded the proceedings be dropped. The assessing officer proceeded to record satisfaction based on cash payments to BGR Construction LLP and an unexplained conveyance deed with Meet Spaces LLP.

Procedure Under Section 148A(b) and Principles of Natural Justice:
The main ground of challenge was the alleged violation of the procedure under Section 148A(b) of the Act and principles of natural justice. The Petitioner argued that the material relied upon by the revenue was not provided, hindering the ability to respond effectively. The Petitioner cited a Supreme Court judgment emphasizing the need for providing information and material to enable a proper reply. The lack of material supplied, despite its availability with the assessing officer, was highlighted, rendering the Petitioner handicapped in responding to the notice.

Other Arguments Raised:
Additional arguments included the failure to obtain prior approval before issuing a clarification communication and the failure to conduct an inquiry as required under Section 148A(a) of the Act. However, the court focused on the violation of the procedure prescribed under Section 148A(b) due to the failure to provide requisite material. The court held that the reassessment proceedings were unsustainable based on this violation.

Judgment and Disposition:
The court allowed the petition, quashing the impugned order and notice. It was noted that the revenue could proceed from the stage of the notice under Section 148A(b) by supplying relevant material, subject to limitations. The writ petition was disposed of accordingly.