2024 (2) TMI 113 - HC - Income Tax

Reopening of assessment u/s 147 - mandation to get prior approval of the specified authority before issuance of show cause notice u/s 148A - scope of new regime - as alleged cash sheets are bogus and sham documents prepared by the then Chief Managing Director of the company - As decided in ASHISH AGARWAL 2022 (5) TMI 240 - SUPREME COURT before issuing any notice u/s 148, AO shall (i) conduct any enquiry, if required, with the approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (ii) provide an opportunity of being heard to the assessee, with the prior approval of specified authority; (iii) consider the reply of the assessee furnished, if any, in response to the show cause notice referred to in clause (b); and (iv) decide, on the basis of material available on record including reply of the assessee, as to whether or not it is a fit case to issue a notice under Section 148 and (v) the AO is required to pass a specific order within the time stipulated. Also stated in the above case that all safeguards are provided before notice under Section 148 of the IT Act is issued. At every stage, the prior approval of the specified authority is required, even for conducting the enquiry as per Section 148(a). Only in a case where, the assessing officer is of the opinion that before any notice is issued under Section 148A(b) and an opportunity is to be given to the assessee, there is a requirement of conducting any enquiry, the assessing officer may do so and conduct any enquiry. Thus, if the assessing officer is of the opinion that any enquiry is required, the assessing officer can do so, however, with the prior approval of the specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment. Petitioner, submitted that there was neither prior approval before issuance of show cause notice under Section 148A of the said Act nor there was approval before initiating action under Section 148A of the said. Thus, procedure adopted by respondent No. 1 is arbitrary to observations of the Honourable Apex Court in the case supra - though the petitioner by reply requested for personal hearing, the same was not granted to the petitioner and, therefore, the action initiated by respondent No. 1 is illegal and as such, effect and operation of the impugned Notices deserve to be stayed. Respondents submits that the Assessment Authority has already followed due procedure and, thereafter, the action was initiated. He seeks time to take necessary instructions from the respondents and to file reply. HELD THAT - As respondent waives service of Notices for respondents so also for newly added respondent No. 3. Stand over to 5.12.2023. In the meanwhile, effect and operation of Notice u/s 142(1) of the said Act; impugned Notice under Section 148; impugned order under Section 148A(d), and impugned Notices under Section 148A(b) is stayed.

Summary

Issues involved: Challenge to Notices and order issued by Assessment Authority under the Income Tax Act, 1961.

Summary:
The petitioner, Chairman and Managing Director of a company, challenged various Notices and orders issued by the Assessing Authority, including impugned Notices under different sections of the Income Tax Act. A survey was conducted at the petitioner's business premises in 2018, resulting in additional income offered for assessment voluntarily by the company. The Assessing Authority accepted the revised return in 2019. The petitioner contended that despite the CBDT Scheme mandating faceless reassessment proceedings, the Assessing Authority issued a Notice under Section 148A(b) without following the prescribed modality. The petitioner responded to the show cause notice, highlighting non-compliance with the Scheme and lack of source information. The Assessing Authority issued a Notice under Section 148 for reassessment, prompting the petitioner to file a detailed reply stating the cash sheets were bogus. The petitioner argued that the procedure followed by the Assessing Authority was arbitrary and illegal, as it did not adhere to the guidelines set by the Apex Court. The petitioner's request for a personal hearing was not granted, leading to a plea for staying the operation of the impugned Notices.

The counsel for the respondents contended that due procedure was followed by the Assessment Authority before initiating the action. The court granted leave to add the Assessment Unit as a respondent and stayed the operation of the impugned Notices until further proceedings. The matter was adjourned for further hearings.