2024 (9) TMI 297 - HC - Income Tax

Validity of reopening of assessment - notice u/s 148A(b) issued by the JAO - no valid approval u/s 151 - HELD THAT - Principal Commissioner of Income Tax gave an approval without application of mind because had the draft order been read, it would have shown that reply of the assessee was scanned and mentioned from internal page 3 on-wards upto internal page -5. Although, the said reply was scanned and made a part of the order u/s 148A(d) in the columns meant for mentioning whether reply was submitted by the assessee it was mentioned that the assessee had not submitted any reply. This Court is of the considered opinion that clearly there is non-application of mind while giving approval u/s 151 of the Act. Revenue has placed reliance of the judgment of Hon'ble Supreme Court in the case of Raymond Woolen Mills Limited 1997 (12) TMI 12 - SUPREME COURT the said judgment does not say that JAO shall issue notice u/s 148 A(b) and order u/s 148 A(d) of the Act without application of mind and without jurisdiction and that the Principal Commissioner, Income Tax, Lucknow shall issue approval order u/s 151 of the Act also without application of mind against the assessee. Accordingly, the order u/s 148 A(d) and notice issued under Section 148 of the Income Tax Act both are quashed - WP allowed.

Summary

Issues:
Challenge to impugned orders under Sections 148A(d) and 148 of the Income Tax Act for Assessment Year 2020-21.

Analysis:
The petitioner, a scrap dealer and sole proprietor of a firm, filed an Income Tax Return for Assessment Year 2020-21, which was accepted. However, a notice under Section 148A(b) was issued alleging involvement in bogus purchases from another company. The petitioner provided detailed replies, submitted tax invoices, e-way bills, and evidence of transactions made through bank accounts, denying any fraudulent activities. Despite this, an order under Section 148A(d) was issued without considering the petitioner's response. The Principal Commissioner of Income Tax approved the order under Section 151 without properly reviewing the petitioner's submissions, indicating a lack of application of mind.

The High Court noted the non-application of mind in granting approval under Section 151 of the Act and considered additional grounds raised by the petitioner challenging the impugned orders. The petitioner argued based on the scheme notified by the Central Government under Section 151A and judgments from various High Courts emphasizing that if the sale of purchased material is not questioned, the purchase cannot be deemed fake. The opposite parties contended that the order under Section 148A(d) only reopens assessment and assured proper opportunities for the assessee during reassessment proceedings, citing the judgment of the Supreme Court in Raymond Woolen Mills Limited Vs. Income Tax Officer.

While acknowledging the judgment cited by the opposite parties, the High Court found that it did not support issuing notices and orders without due application of mind and jurisdiction. Consequently, the High Court quashed the order under Section 148A(d) and the notice under Section 148, remitting the matter back to the authorities to reconsider the petitioner's response, which was quoted in the impugned order but not adequately considered. As a result, the writ petition was allowed, granting relief to the petitioner.