2023 (5) TMI 915 - HC - Income Tax

Validity of Reopening of assessment - AO observed cash withdrawals reported in STR appeared to be non-genuine and hence issued the notice on the ground that the income has escaped assessment for not having taxed as per the provision of the I.T.Act - HELD THAT - We could noticed that the regular assessment has been already carried out, certain queries were raised by the AO. Scrutiny assessment had taken place under Section 143(3) which eventually resulted into Assessing Officer passing an order. After the same was over, at the behest of the DDIT investigation on the issue of the cash withdrawal, the objections raised against the issuance of notice for reassessment for the very year had been challenged. AO while disposing of the same as noted the aspect of scrutiny assessment and also dropping of the proceedings for the A.Y.2013- 14 and 2014-15 on the ground that the aspect of cash withdrawal was not at any point of time examining by Assessing Officer, though the books of account and other material had been placed, has continued the proceedings and issued the notice u/s. 148 of the I.T.Act. Since there was a scope of AO for the scrutiny assessment at the time of scrutiny assessment, which is still in the grey area as to whether the aspect of cash withdrawal, he could not be noticed because of want of required material available to that but, to despite the scrutiny assessment which had undertaken. We are of the opinion that the re-assessment shall continue. However, by way of interim relief, the opportunity to be given to the petitioner for producing before the officer concerned all the requisite material. Let the final assessment order will not be passed without permission of this Court. The petitioner shall continue to co-operate. None of the findings and observations shall prejudice the rights of the parties before the Assessing Officer.

Summary

Issues:
1. Special Civil Application No. 11846 of 2022 - Joining Serious Fraud Investigation Organization.
2. Special Civil Application No. 14786 of 2022 - Reassessment notice under Section 148 of the Income Tax Act for A.Y. 2018-19 based on cash withdrawals.

Special Civil Application No. 11846 of 2022:
In this application, the Court had issued a notice which is pending. The advocate for the petitioner seeks to join the Serious Fraud Investigation Organization. The Court allows the application to move for joining the newly added parties and schedules the matter for further hearing on 10th April, 2023.

Special Civil Application No. 14786 of 2022:
The respondent challenges the notice issued under Section 148 of the Income Tax Act for A.Y. 2018-19, claiming the petitioner failed to disclose vital details related to cash withdrawals of Rs.18.00 crores. The assessing officer issued the notice based on a Suspicious Transaction Report (STR) generated by the Finance Intelligence Unit of India, suspecting non-genuine cash withdrawals. Although reopening for A.Y. 2013-14 and 2014-15 was dropped, the respondent argues the cash withdrawal explanation is irrelevant. The Court notes the petitioner is not a Shell Company but focuses on the cash withdrawal issue. Despite a previous scrutiny assessment under Section 143(3) of the I.T. Act, the assessing officer proceeded with the reassessment notice under Section 148 based on the cash withdrawal aspect. The Court allows the reassessment to continue but grants interim relief for the petitioner to provide necessary material. The final assessment order requires Court permission, and both parties must cooperate without prejudice to their rights. The respondent is permitted to submit the draft assessment order for final hearing.

This judgment addresses the issues of joining the Serious Fraud Investigation Organization in one case and the reassessment notice under the Income Tax Act for cash withdrawals in another. The Court allows the petitioner to join the investigation organization and grants interim relief in the reassessment case to provide required material, ensuring final assessment orders are subject to Court permission.