2024 (1) TMI 612 - HC - Income Tax

Validity of Reopening of assessment - notice issued u/s 148A(d) entirely on the basis of information obtained from the Insight Portal in accordance with the risk management strategy of the Income Tax Department - immovable property was purchased for the sale consideration less than guideline value on which stamp duty was paid - whether there is direct or live link between the information obtained from the Insight Portal and the income allegedly escaping assessment? - HELD THAT - As show cause notice did not contain any reference to the difference between the guideline value and the sale consideration and call for an explanation. Instead, skeletal information regarding the purchase of the relevant immovable property was provided under the first two entries. On this basis, it cannot reasonably be expected of the noticee to provide an explanation with regard to the difference. While the impugned order refers to the lack of documentary evidence with regard to the gifts received from the petitioner's mother, although necessary information was provided by the petitioner, there is no discussion or evidence of consideration of the income tax returns of the petitioner's mother so as to test the veracity of the petitioner's explanation. Moreover, the explanation provided by the petitioner with regard to the receipt of a home loan of Rs. 93,75,000/- from Sundaram BNP Paribas, which formed the alleged principal source for the purchase, has not been dealt with in the impugned order. Unless an assessee's response to the show cause notice is duly considered before a decision is taken to issue notice under Section 148, the statutory mandate of a prior show cause notice would be reduced to an empty formality. Therefore the impugned order calls for interference and the said order is hereby quashed.

Summary

Issues Involved:
The judgment deals with a challenge against an order under Section 148A(d) of the Income Tax Act and a consequential notice under Section 148, raising concerns about the basis of information, direct link between information and income, and a finding on an issue not raised in the show cause notice.

Challenge on Basis of Information:
The petitioner contested the order issued under Section 148A(d) solely based on information from the Insight Portal, citing the Bombay High Court judgment and emphasizing the need for a direct link between the information and the alleged income escaping assessment.

Direct Link Requirement:
The petitioner argued that there was no direct link between the Insight Portal information and the alleged income, relying on a Bombay High Court judgment, which states that a direct link is essential for issuing a notice under Section 148.

Finding on Unraised Issue:
The challenge also included a finding in the impugned order regarding the difference between sale consideration and guideline value, leading to an additional assessable income under Section 56(2)(vii)(b) of the Income Tax Act. The petitioner contended that this issue was not raised in the show cause notice, depriving them of an opportunity to respond.

Response by Respondents:
The senior standing counsel for the respondents argued that the impugned order was justified, highlighting discrepancies in property values and lack of evidence for gifts received. He emphasized that the petitioner had the opportunity to respond but failed to provide satisfactory explanations.

Judicial Analysis and Decision:
The court analyzed the contentions of both parties and found that the impugned order lacked consideration of the petitioner's responses to the show cause notice. It concluded that the order should be quashed due to raising an unnotified issue. The court directed the issuance of a fresh show cause notice, ensuring all relevant issues are addressed within three months.

Conclusion:
The writ petition was disposed of with directions for a fresh show cause notice, emphasizing the importance of considering the petitioner's responses before issuing further orders. The connected miscellaneous petitions were closed, and no costs were awarded in the matter.