2023 (9) TMI 618 - HC - Income Tax

Reopening of assessment u/s 147 - Notice issued u/s 148A(b) - principal allegation leveled against the petitioner was that it had purchased foreign currency and made outward foreign remittance -petitioner had failed to provide the SPA executed between itself and F1 Info - stand taken was, the petitioner was, both, the remitter and the beneficiary - AO held that, although, the petitioner had given some explanation with regard to the repatriation, independent verification had not been carried out by reaching out to IDFC Ltd. - HELD THAT - In our view, before passing the impugned order AO could have called upon the petitioner to submit not only the SPA, but also perhaps a letter of confirmation from IDFC. These were the simple steps that could have been taken before passing an order u/s 148A(d) of the Act. We have put this aspect to Mr Rai. Mr Rai says that an inquiry can be made with regard to the issues which have been highlighted by the AO in the impugned order. Therefore, in our opinion, the best way forward would be to set aside the impugned order, with liberty to the AO to pass a fresh order after he has called upon the petitioner to submit the requisite documents in support of its defence with regard to commencement of reassessment proceedings. The impugned order passed u/s 148A(d) of the Act is set aside. Resultantly, the notice of even date, i.e., issued u/s 148 of the Act will also collapse. AO will issue notice to the petitioner which would indicate the documents that he wishes the petitioner, as noted hereinabove, to place before him. AO will also furnish to the petitioner any material/information which is in his possession and may not have been furnished to the petitioner up until now, in support of his conclusion arrived at in the impugned order that income had escaped assessment.

Issues involved:
The judgment concerns a writ petition related to Assessment Year 2019-20 challenging notices and orders issued under the Income Tax Act, 1961.

Details of the judgment:

1. Allegations and Financial Transaction:
The petitioner was accused of purchasing foreign currency and making outward foreign remittance based on information from IDFC First Bank Ltd. The disputed amount was Rs. 9,10,36,693, leading to the issue being flagged with the Assessing Officer (AO).

2. Petitioner's Responses:
The petitioner responded to the notices by explaining that it had purchased shares in an Indian entity named F1 Info Solutions and Services Pvt. Ltd. as per a share purchase agreement dated 02.09.2017. An amount of Rs. 4,51,06,614 was retained pending fulfillment of certain conditions.

3. AO's Decision:
The AO was not convinced by the petitioner's explanation and passed an order on 01.05.2023, holding that income of Rs. 9,10,36,673 had escaped assessment due to the petitioner's failure to provide the SPA and independent verification from IDFC.

4. Court's Observations:
The court noted that the AO could have requested the SPA and confirmation from IDFC before passing the order under Section 148A(d) of the Act. It was suggested that these steps should have been taken for a fair assessment process.

5. Court's Decision:
The court set aside the impugned order dated 01.05.2023 and directed the AO to conduct a fresh assessment after obtaining the necessary documents and information from the petitioner. The notice issued under Section 148 of the Act was also deemed void.

6. Further Directions:
The AO was instructed to request specific documents from the petitioner, provide any relevant material in his possession, and grant a personal hearing to the petitioner's authorized representative. The court emphasized that its decision did not impact the AO's authority to proceed with a fresh assessment.

7. Conclusion:
The writ petition was disposed of with the parties instructed to follow the digitally signed copy of the order for further actions.

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