2023 (8) TMI 683 - HC - Income Tax

Validity of reopening of assessment - Reason to believe - whether show-cause notice contains sufficient information revealing the opinion formed by Assessing Officer that certain income of assessee has escaped assessment? - HELD THAT - As in the backdrop of textual interpretation of Section 148A(b), it is evident that if the show-cause notice contains sufficient information revealing the opinion formed by AO that certain income of assessee has escaped assessment with a precise but concise elaboration in the show-cause notice of the foundantional material behind the opinion, then the show-cause notice can sustain judicial scrutiny even if the fundantional evidence/material (oral/documentary) is not supplied to the assessee. The reason for taking the aforesaid view is not far to see. The insertion of Section 148A w.e.f. 01.04.2021 in the Income Tax Act is to ensure that the power u/s 148 is not exercised as a matter of course or without application of mind. Thus, the inquiry contemplated by Section 148A(b) is not a detailed or full-scale one, but is merely meant to offer reasonable opportunity of being heard to the assessee to avoid casual re-opening assessment u/s 148. It may not be out of place to mention that the show-cause notice u/s 148A(b) ought to be pregnant with concise and precise information revealing the information about foundational material which persuaded the AO to come to a tentative finding that certain income has escaped assessment. In the conspectus of aforesaid discussions, it is obvious that petitioner/assessee is not entitled to the material/evidence (oral/documentary) which are the foundation of the opinion formed by the Assessing Officer so long as a show-cause notice mentions about such foundational evidence/material and the supportive reasons to form the said opinion. It is obvious from the show-cause notice u/s 148A(b) that it is accompanied by annexure which informs the petitioner/assessee of the reasons and information which persuaded the Assessing Officer to form the tentative opinion that income pertaining to assessment year 2016-17 has escaped assessment. Moreso, the petitioner/assessee has also filed a detailed reply (Annexure-P/4) to the said notice. From the above, it is evident that the impugned order u/s 148A(b) and the consequential notice u/S 148 were issued/passed after following due process of law. Pertinently, the question of going into the veracity and genuineness of material/evidence forming the opinion of the Assessing Officer suggesting that income of petitioner/assessee has escaped assessment ought not to be gone into while exercising writ jurisdiction under Article 226 or supervisory jurisdiction under Article 227 of the Constitution. Thus the ground of reliability and tenability of the evidence/material is not considered herein.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act.
2. Consideration of the reply submitted by the petitioner/assessee.
3. Applicability of Section 149(b) and the absence of foundational material.
4. Interpretation of Section 148A of the Income Tax Act.

Summary of Judgment:

Issue 1: Validity of the Notice Issued under Section 148
The petitioner challenged the notice dated 28.04.2023 issued under Section 148 of the Income Tax Act, arguing that the order under Section 148A(d) did not meet the foundational prerequisites. Despite no information suggesting that income chargeable to tax had escaped assessment, the impugned order under Section 148A(d) was passed, leading to the issuance of the notice under Section 148.

Issue 2: Consideration of the Reply Submitted by the Petitioner/Assessee
The petitioner contended that the impugned order/notice was issued without considering the reply submitted by the petitioner/assessee. However, it was not disputed that the opportunity of being heard as contemplated by Section 148A(b) & (c) was afforded by the Revenue, and the reply of the petitioner/assessee was obtained.

Issue 3: Applicability of Section 149(b) and the Absence of Foundational Material
The petitioner argued that the notice under Section 148 was untenable due to the statutory bar under Section 149(b) and the absence of books of accounts/documents/evidence revealing a case of escaped assessment. The court emphasized that the show-cause notice must contain enough information to disclose the intention of the Assessing Officer, enabling the assessee to respond effectively.

Issue 4: Interpretation of Section 148A of the Income Tax Act
The court discussed the newly inserted Section 148A, which provides an additional opportunity for the assessee to be heard before reopening a case of escaped assessment. The court clarified that the inquiry under Section 148A is not a detailed one but is meant to inform the assessee of the reasons and information suggesting that income chargeable to tax has escaped assessment. The court held that the statute does not obligate the Assessing Officer to supply material/evidence supporting the show-cause notice, provided the notice contains sufficient information revealing the opinion formed by the Assessing Officer.

The court noted that certain High Courts had taken a contrary view, but those judgments did not have persuasive value as they did not consider the foundational principle of interpreting taxing statutes. The court emphasized that the veracity and genuineness of the material/evidence forming the opinion of the Assessing Officer should not be examined while exercising writ jurisdiction under Article 226 or supervisory jurisdiction under Article 227 of the Constitution.

Conclusion
The court dismissed the petition at the admission stage, granting the petitioner the liberty to avail the statutory alternative remedy under the Income Tax Act in accordance with the law.

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