2023 (11) TMI 86 - HC - Income Tax

Reopening of assessment u/s 147 - undisclosed bank deposits - as per AO petitioner had failed to provide any evidence to establish that the amounts found in the accounts maintained with HDFC Bank and DCB Bank in the FY 2014-15 did not belong to him, i.e., he was not the beneficiary - HELD THAT - As noted while narrating the events, the petitioner had taken an emphatic stand that the bank accounts adverted to by the AO did not belong to him. Petitioner instead had furnished the statement of accounts of the two banks, i.e., ICICI Bank and Jammu and Kashmir Bank which were maintained by him. Thus, without any actionable material, the AO embarked on a journey to reopen, in a sense, a closed assessment which had reached culmination via order at least at the point in time when notice under Section 148A(b) of the Act was issued. What has compounded, in our view, at least for the moment, the problem of the respondents/revenue is the order passed by the CIT(A). Assessment order had, in fact, made no addition to the declared income of the petitioner. As noticed hereinabove, despite this position obtaining, a demand notice was served on the petitioner pursuant to the assessment order . It is perhaps because of this position that even though the CIT(A) had called for a response to the remand report, the AO failed to place before the CIT(A) his stance in the matter . Reopening order set aside - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the order dated 19.07.2022 passed under Section 148A(d) of the Income Tax Act, 1961.
2. Validity of the consequential notice of even date issued under Section 148 of the Act.

Summary:

Issue 1: Validity of the order dated 19.07.2022 under Section 148A(d)
The petitioner challenged the order dated 19.07.2022 under Section 148A(d) of the Income Tax Act, 1961, which was based on allegations that the petitioner was a beneficiary of accommodation entries provided by Mr. Rajnish Garg, amounting to Rs. 50,94,24,738/-. The petitioner argued that he did not maintain any account with HDFC Bank and DCB Bank as alleged. The Assessing Officer (AO) passed a reassessment order on 22.03.2022 under Section 147 read with Sections 144 and 144B, which did not make any addition to the petitioner's income. Despite this, a demand notice was issued for Rs. 67,55,23,292/-. The petitioner appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who noted discrepancies and presumed errors in the AO's calculations. The High Court found that the AO failed to provide fresh material and acted on identical allegations from the previous notice, thus constituting a change of opinion. The Court concluded that the AO reopened a closed assessment without actionable material, leading to the quashing of the order dated 19.07.2022.

Issue 2: Validity of the consequential notice issued under Section 148
The petitioner also contested the consequential notice issued on 19.07.2022 under Section 148, which reiterated the same allegations as the previous notice dated 31.03.2021. The petitioner argued that the AO had no new material and the notice was issued without due application of mind. The respondents claimed the notice was pursuant to the Supreme Court judgment in Union of India v. Ashish Aggarwal, necessitating action under the new regime post Finance Act 2021. However, the High Court observed that the Supreme Court judgment did not mandate triggering proceedings under the new regime for cases already assessed. The Court emphasized that the AO ignored the fact that an assessment order had already been passed on 22.03.2022, making the subsequent notice redundant. Consequently, the notice dated 19.07.2022 under Section 148 was quashed.

Conclusion:
The High Court allowed the writ petition, quashing both the order dated 19.07.2022 under Section 148A(d) and the consequential notice of the same date under Section 148. The Court ordered the Registry to upload relevant documents and vacated the interim order dated 20.09.2022.