2023 (5) TMI 165 - HC - Income Tax

Reopening of assessment - power u/s 148A invoked - Assessee raised fake invoices in executing circular transactions - petitioner argued that reopening of the assessment in respect of assessment year 2018- 2019 is illegal, without jurisdiction and void ab initio - HELD THAT - The authority recorded that as the petitioner-assessee has not produced any satisfactory documentary evidence in support of executing the sub-contracts made between the petitioner M/s. Chetak Enterprises Limited and M/s. APCO Infratech Private Limited, the assessee having also failed to produce bills and vouchers with regard to transactions with M/s. APCO Infotech Private Limited, a case of reopening of assessment is made out. We, thus, find that the material information collected by the respondent was made a basis to arrive at the reason to believe that the petitioner is engaged in raising fake invoices in executing circular transactions with M/s. APCO Infratech Private Limited. On such detailed consideration that income chargeable to tax to the tune of Rs.75 crores has escaped assessment for the assessment year 2018-2019, within the meaning of Section 147 of the Act, the authority considered the present case to be a fit case for issuance of notice under Section 148 of the Act for the assessment year 2018-2019. In the present case, the petitioner was given due opportunity of hearing by giving notice under Section 148A(b) of the Act, to which he gave a detailed reply and thereafter detailed order under Section 148A(d) has been passed. Recently, a Division Bench of this Court in the case of Laxmi Meena vs. Union of India Ors. 2023 (2) TMI 1134 - RAJASTHAN HIGH COURT held that in the matter of challenge to order passed u/s 148A followed by issuing notice u/s148 of the Act, the petitioner had not alleged any procedural impropriety, irregularity or violation of statutory provisions in the matter of initiation of proceedings or passing of any order under Section 148A(d) - Division Bench taking into consideration the settled legal position, dismissed the petition giving liberty to the writ petitioner to avail the remedy in the proceedings subsequent to notice under Section 148 of the Act. Thus no case is made out for interference at this stage. The writ petition is, therefore, dismissed, however, reserving liberty to the petitioner to raise all the objections at the subsequent stages after issuance of notice under Section 148 of the Act and re-assessment proceedings.

Issues Involved:
1. Legality of reopening the assessment for the assessment year 2018-2019.
2. Validity of the notice issued under Section 148A(b) of the Income Tax Act, 1961.
3. Examination of the material basis for reopening the assessment.
4. Procedural propriety and statutory compliance in issuing the notice under Section 148 of the Act.

Summary:

1. Legality of Reopening the Assessment:
The petitioner argued that the reopening of the assessment for the assessment year 2018-2019 is illegal, without jurisdiction, and void ab initio. The petitioner had submitted its return of income and a regular assessment order was passed under Section 143(3) of the Income Tax Act, 1961 on 15.07.2021. The return of income was filed under Section 139 of the Act on 30.10.2018, declaring an income of Rs.42.44 crores, and the assessment was completed with certain ad hoc disallowances.

2. Validity of Notice under Section 148A(b):
A notice under Section 148A(b) was issued on 10.03.2022, providing an opportunity of hearing against the proposed reopening of the assessment based on information from a search and survey action under Sections 132 and 133 of the Act on M/s APCO Infratech Private Limited and associates. The petitioner contended that all relevant documents and transactions were disclosed during the original assessment, and the reopening was without legal authority.

3. Examination of Material Basis for Reopening:
The respondent argued that during the search and survey on M/s APCO Infratech Private Limited, it was revealed that transactions between the petitioner and M/s APCO Infratech Private Limited were circular in nature, involving fake invoices. This provided a basis for invoking Section 148A of the Act. The petitioner was given an opportunity to respond, and a detailed order under Section 148A(d) was passed after considering the reply.

The court noted that the search and survey action conducted on 15.09.2021 revealed circular transactions and bogus bills between the petitioner and M/s APCO Infratech Private Limited. The competent authority found that invoices of almost identical amounts were raised at the end of the financial year, raising suspicion of fictitious transactions to inflate turnover and improve credit ratings. The petitioner failed to provide satisfactory documentary evidence of executing sub-contracts or producing bills and vouchers, justifying the reopening of the assessment.

4. Procedural Propriety and Statutory Compliance:
The petitioner relied on the judgment in Micro Marbles Private Limited vs. Office of the Income Tax Officer, where reopening was found vitiated due to non-supply of material referred to in the "reasons to believe." However, in this case, the petitioner was given due opportunity of hearing, and a detailed order under Section 148A(d) was passed.

The court referenced several judgments, including Raymond Woollen Mills Limited vs. Income Tax Officer and Rasulji Buxji Kathawala vs. Income Tax Commissioner, emphasizing that the sufficiency or correctness of the material is not to be considered at this stage. The court cannot strike down the reopening based on prima facie material. The petitioner has the opportunity to challenge the merits during reassessment proceedings.

The court concluded that no procedural impropriety or statutory violation was alleged in the initiation of proceedings or the order under Section 148A(d). The consistent legal position is that the writ court should not interfere at a premature stage, and the petitioner has adequate remedies under the Act.

Conclusion:
The writ petition was dismissed, with the petitioner given liberty to raise all objections during the reassessment proceedings subsequent to the notice under Section 148 of the Act.

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