2024 (9) TMI 148 - HC - Income Tax

Validity of reassessment proceedings - reasons to believe - Unexplained share transactions - petitioner did not furnish the Sales and Purchase Register - HELD THAT - AO has failed to justify any of the reasons assigned to come to the conclusion that it is a fit case to reopen the assessment for the year under consideration. On perusal of the impugned order passed u/s 148A (d) of the Act, it is clear that the AO has arrived at conclusion to hold that it is a fit case to reopen only on the ground that the petitioner did not furnish the Sales and Purchase Register. AO by considering the total of party-wise purchases and party-wise sales as stated in Form GSTR-I has come to the conclusion that there is escapement of income without there being any material/information on record. Thus the AO has passed the impugned order with total non application of mind to hold that the assessee has failed to explain six transactions and the same has remained unexplained and the assessee has failed to prove the genuineness of this transaction and also the source of income. AO however, has accepted the explanation tendered by the petitioner in respect of all the six transactions except observing that the assessee did not furnish the Sales and Purchase Register and therefore, the source for sales and purchase is not known ignoring the fact that the petitioner has filed the return of income for the year under consideration along with audit report and audited balance sheet and Profit and Loss Account. Petition is allowed.

Issues Involved:
1. Validity of the order under section 148A(d) of the Income Tax Act, 1961.
2. Validity of the notice under section 148 of the Income Tax Act, 1961.
3. Alleged escapement of income for Assessment Year 2018-2019.
4. Non-application of mind by the Assessing Officer.
5. Failure to consider the petitioner's explanations and documents.

Issue-wise Detailed Analysis:

1. Validity of the order under section 148A(d) of the Income Tax Act, 1961:
The petitioner challenged the order dated 29.03.2024 passed under section 148A(d) of the Income Tax Act, 1961, contending that it was issued without proper consideration of the explanations and documents provided. The court observed that the Assessing Officer failed to justify the reasons for reopening the assessment and concluded that the order was passed with total non-application of mind.

2. Validity of the notice under section 148 of the Income Tax Act, 1961:
The petitioner also sought to quash the notice under section 148 of the Act issued on 29.03.2024 for AY 2018-2019. The court found that the notice was issued based on the same flawed reasoning and lack of evidence as the order under section 148A(d). Consequently, the notice was also deemed invalid.

3. Alleged escapement of income for Assessment Year 2018-2019:
The respondent claimed that income amounting to Rs. 126,03,57,840/- had escaped assessment due to the petitioner's failure to explain certain transactions. The petitioner provided explanations and documentary evidence for each transaction, including sales and purchase data from GSTR-I, which the Assessing Officer ignored. The court noted that the Assessing Officer accepted the petitioner's explanations for most transactions but concluded there was escapement of income solely due to the non-furnishing of the sales and purchase register.

4. Non-application of mind by the Assessing Officer:
The court emphasized that the Assessing Officer's decision to reopen the assessment was made without proper application of mind. The officer relied on party-wise sales and purchase totals from GSTR-I without any supporting material or information. The court found this approach to be mechanical and lacking in substantive reasoning.

5. Failure to consider the petitioner's explanations and documents:
The petitioner argued that the Assessing Officer ignored the explanations and documents provided, which clearly established that there was no escapement of income. The court agreed, noting that the petitioner had submitted detailed reports and ledger accounts, which the Assessing Officer failed to consider adequately.

Conclusion:
The court concluded that the Assessing Officer's actions were unjustified and lacked proper reasoning. Consequently, the petition was allowed, and both the impugned order under section 148A(d) and the notice under section 148 of the Act were quashed and set aside. The rule was made absolute to the aforesaid extent, and no order as to costs was issued.

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