2024 (9) TMI 1630 - HC - Income Tax

Validity of notices u/s 133 (6) and subsequent notice u/s 148 - HELD THAT - Almost in similar facts, the High Court of judicature of Bombay in Benaifer Vispi Patel 2024 (8) TMI 53 - BOMBAY HIGH COURT found that while the Central Government is empowered under Section 135A of the Act to make a scheme of income tax in the official gazette for the purpose of collecting information under Section 133B of the Act or for demanding the information under Section 133C of the Act, or by exercising power of inspection under Section 134 of the Act or under Section 135 of the Act, however, the same has to be exercised with due caution and care. While the petitioner was served with a notice under Section 133 (6) of the Act in the present case and reply was filed, the reply was ignored stating that the same has not been filed. In circumstances where the information may not have been received in the electronic mechanism system which is also prone to errors, once it has come on record that reply had actually been filed, it would be wholly unjustified to allow the Revenue to make the assessee face the cumbersome proceedings under Section 148 of the Act. Having proceeded on a presumption that reply not having been filed and the amount having escaped from income tax assessed, we are satisfied that the said amount was already recorded and included in the ITR for the AY 2020-21 and the same was duly processed by the AO and it was offered for tax as part of business turnover. We are satisfied that the impugned notice u/s 148 of the Act in the present case has been issued without application of mind and stands vitiated on that count. The proceedings initiated, therefore, are not sustainable in law. Notice dated 31.03.2024 has been issued by the ACIT Central Karnal and the notices issued under Section 133 (6) and Section 148 of the Act were issued by the jurisdictional Assessing Officer . He, therefore, was also not competent to issue the same in view of the judgment passed in Jasjit Singh 2024 (8) TMI 228 - PUNJAB AND HARYANA HIGH COURT wherein held notices issued by the JAO under Section 148 and the proceedings initiated thereafter without conducting the faceless assessment as envisaged under Section 144B have been found to be contrary to the provisions of the Act, 1961 and accordingly set aside. Thus, we find the notices are not sustainable in law. We, accordingly, quash the impugned notices issued under Section 133 (6) of the Act, consequential notice dated 31.03.2024 issued under Section 148. WP allowed.

Summary

Issues:
Quashing of notices under Section 133 (6) of the Income Tax Act and subsequent notice under Section 148 of the Act for AY 2020-21.

Analysis:
The petitioner, engaged in the sale of medicines and earning commission, filed a reply to a notice under Section 133 (6) disclosing commission income already included in the return. Despite this, a notice under Section 148 was issued assuming undisclosed income. The petitioner argued that the notice was erroneous as the income was declared in the return. The court noted that the reply was indeed filed, and the income was processed and offered for tax, making the notice unjustified.

The court referred to a Supreme Court judgment emphasizing the need for a rational connection between material and belief in income escapement. The petitioner's counsel argued that the notice under Section 148 was issued erroneously, as the income was disclosed in the return and a reply was submitted to the initial notice. The court found the notice to lack application of mind and be unsustainable in law.

The court highlighted a similar case in the Bombay High Court where the government's power to demand information under the Income Tax Act was to be exercised cautiously. In this case, the petitioner's reply to the notice under Section 133 (6) was ignored, leading to the unjustified issuance of a notice under Section 148. The court concluded that the impugned notice lacked proper application of mind and was therefore quashed.

Additionally, the court noted jurisdictional issues in the issuance of notices, citing a previous judgment. It emphasized the need to strictly follow statutory provisions and not override them with circulars or instructions. The court quashed all impugned notices and subsequent proceedings, allowing the revenue to proceed as per the law.

In conclusion, the court allowed the writ petition, disposed of pending applications, and did not award any costs. The quashed notices under Section 133 (6) and 148 of the Income Tax Act, along with any related proceedings, were deemed unsustainable in law.