2024 (1) TMI 369 - HC - Income Tax

Reopening of assessment u/s 147 - notice under Section 148A extending period of limitation - cash deposited in the bank unexplained - petitioner made submissions that the show cause notice was issued on the premise that the cash transactions of the petitioner were about Rs.50,00,000/- and extended period of limitation was invoked - petitioner promptly responded indicating that the sum of cash transactions was Rs.33,62,000/- only i.e. less than Rs.50,00,000/- and as the notice was issued after three years from the assessment year, the same was barred by limitation. HELD THAT - The authority despite the specific indications made by the petitioner, without application of mind and in a wholly mechanical manner came to the conclusion that the amount deposited in cash was Rs.59,75,000/- and consequently, found it a fit case u/s 148 of the Act of 1961. Though the notice was issued on the assumption that the cash deposits were Rs.59,75,000/- by invoking extended period of limitation, as a fact, it was found that the same was Rs.33,62,000/- only and once, the said aspect was clear to the authority, the authority lost its jurisdiction to further continue with the proceedings as the limitation u/s 149(1)(a) of the Act of 1961 of three years would trigger and the authority would lose the jurisdiction on account of limitation, as the amount was less than Rs.50,00,000/-. However, the authority while passing the order u/s 148A(d) in a wholly mechanical manner rejected the plea and proceeded to issue notice u/s 148 of the Act of 1961. Whereafter, proceedings were sought to be converted into notice under Section 69A read with Section 115 BBE which action also is wholly impermissible. Once the notice under Section 148A of the Act of 1961 is found to be barred by limitation, no further proceedings could be initiated under any of the provisions of the Act of 1961 and the purported exercise of jurisdiction pursuant to notice under Section 148A of the Act of 1961 could not be initiated or proceeded with. Thus following the dictum of this Court in case of Abdul Majeed 2022 (7) TMI 865 - RAJASTHAN HIGH COURT the action of the respondent being barred by limitation cannot be sustained. Decided in favour of assessee.

Summary

Issues Involved:
The issues involved in the judgment are the validity of the order passed under Section 148A(d) of the Income Tax Act, 1961, the notice issued under Section 148 of the Act, and the consequential assessment order for the assessment year 2015-16.

Validity of Order Under Section 148A(d):
The petitioner challenged the order dated 31.03.2022 passed under Section 148A(d) of the Act, arguing that the proceedings should be dropped as the deposited amount was less than the threshold for extended limitation under Section 149(1)(b) of the Act. The Assessing Authority, however, rejected the petitioner's contentions and proceeded with the notice under Section 148 of the Act.

Jurisdiction and Notice Issuance:
The petitioner contended that the notice issued under Section 148A was without jurisdiction as the cash transactions were found to be lower than initially assumed. The authority proceeded to issue a show cause notice under Section 69A read with Section 115BBE of the Act, despite the cash deposits being clarified by the petitioner.

Validity of Assessment Order:
The petitioner raised objections about the jurisdiction to question the validity of the proceedings under Section 148A. The authority determined the income of the petitioner at Rs.15,18,900/-, citing lack of jurisdiction to consider the petitioner's arguments based on a previous judgment.

Judgment and Conclusion:
The High Court considered the submissions and material on record, finding that the authority had incorrectly concluded the amount deposited in cash, leading to a notice under Section 148 of the Act. The Court referred to a previous judgment and ruled that the action of the respondent was barred by limitation and, therefore, quashed the show cause notice and all consequential proceedings and assessment orders.