2024 (3) TMI 481 - HC - Income Tax

Reopening of assessment u/s 147 - validity of order passed u/s 148A(d) - According to the AO, the information is enough to suggest that the income has escaped assessment - eligible sanction accorded u/s 151 or not ? - information suggested that Petitioner had booked a fictitious loss - HELD THAT - According to us, this order passed under Section 148A(d) of the Act defies sense because the entire basis on which the notice under Section 148A(b) of the Act was issued, is because the information suggested that Petitioner had booked a loss and fictitious loss and when Petitioner has given evidence that the entire information is incorrect and infact Petitioner has made a profit AO should have reflected on the information submitted by Petitioner and passed orders suitably. In the order passed u/s 148A(d) AO has reproduced the entire reply given by Petitioner to the notice issued u/s 148A(b) of the Act and therefore, even Petitioner s case was before the PCIT who accorded sanction u/s 151 - The fact that PCIT has granted sanction when Petitioner has highlighted that the entire information, based on which the notice u/s 148A(b) issued was incorrect, the PCIT should have either refused to grant sanction or directed the AO to deal with the stand taken by Petitioner appropriately. Not having done that, reflects non-application of mind even by the PCIT. In our view, the impugned order and the impugned notice u/s 148A(d) and 148, respectively, are required to be quashed and set aside, which we hereby do.

Summary

Issues involved:
The issues involved in the judgment are the jurisdiction of an order passed under Section 148A(d) of the Income Tax Act, 1961 and the legality of a notice issued under Section 148 proposing to reopen the assessment for Assessment Year 2019-2020.

Details of the judgment:

1. The petitioner challenged an order and notice issued under the Income Tax Act, claiming them to be without jurisdiction, illegal, and arbitrary.

2. The petitioner, a publicly listed company, declared a loss for AY 2019-2020 and merged with two other entities in the previous financial year as per the National Company Law Tribunal's order.

3. The petitioner's case was selected for scrutiny during search and seizure proceedings, and the assessment was completed under Section 143(3) of the Act. The petitioner has challenged this assessment order before the Commissioner of Income Tax (Appeals).

4. The petitioner received a notice alleging fictitious losses based on information from an investigation. The petitioner responded, explaining the actual profits and losses incurred.

5. The Assessing Officer passed an order under Section 148A(d) alleging income escapement based on the initial notice, despite the petitioner's evidence to the contrary.

6. The High Court found the order under Section 148A(d) illogical as the basis for the notice was disproved by the petitioner's evidence. The Principal Commissioner of Income Tax's sanction was questioned for not considering the petitioner's submissions.

7. The High Court quashed the impugned order and notice, directing the AO to provide details of the alleged losses before passing a fresh order, ensuring a personal hearing for the petitioner.

8. The High Court kept all rights and contentions of the parties open, disposing of the petition.