2023 (6) TMI 671 - HC - Income Tax

Validity of reopening of assessment u/s 147 - independent application of mind by AO - AO has failed to appreciate the reply submitted by the petitioner, in response to the notice issued u/s 148A(b) - HELD THAT - What the AO was required to apply his mind was whether the taxable income, if any, earned, had been brought to tax in the hand of one or the other legal entities i.e., the firm or the proprietorship concern; There was enough and more material placed before the AO to Establish this fact. Therefore, in our view, the AO should revisit the issue, and in this regard, also offer a personal hearing to the petitioner and/or his authorised representative. Accordingly, the impugned order passed u/s 148A(d) of the Act is set aside. AO will be at liberty to pass a fresh order albeit, after affording opportunity of hearing to the petitioner and/or his authorised representative, as indicated above.

Summary

Issues Involved:
The issues involved in the judgment are the challenge to the notice issued under Section 148A(b) of the Income Tax Act, 1961, the order passed under Section 148A(d) of the Act, and the consequential notice issued under Section 148 of the Act for Assessment Year 2016-17.

Challenge to Notice Under Section 148A(b):
The petitioner challenged the notice issued under Section 148A(b) of the Income Tax Act, 1961, claiming that the Assessing Officer failed to appreciate the reply submitted by the petitioner regarding the facts mentioned in the notice. The petitioner provided supporting documents, including the dissolution deed of the firm, the certificate of Importer-Exporter Code (IEC), balance sheet for AY 2016-17, Income Tax Return (ITR) for the relevant assessment year, and previous assessment orders. The petitioner's explanation led to the dropping of penalty proceedings under Section 271(1)(b) for the previous assessment year. The High Court found that the AO did not analyze these aspects correctly while passing the impugned order.

Challenge to Order Under Section 148A(d) and Consequential Notice:
The respondent/revenue argued that the petitioner did not surrender the PAN related to the firm, leading to reassessment proceedings. The High Court observed that the AO should have considered whether the taxable income had been appropriately taxed in either the firm or the proprietorship concern. Sufficient material was available to establish this fact, and a personal hearing should have been offered to the petitioner. Consequently, the order passed under Section 148A(d) was set aside, along with the consequential notice. The AO was directed to revisit the issue, provide a personal hearing, and pass a speaking order addressing all factual and legal submissions.

Conclusion:
The High Court disposed of the writ petition by setting aside the impugned order and directing the AO to pass a fresh order after affording a hearing to the petitioner. The AO was instructed to grant adequate opportunities for responses or documents if needed and to ensure the new order comprehensively addresses all submissions. Parties were instructed to act based on digitally signed copies of the order.