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TMI Blog2024 (11) TMI 1162X X X X Extracts X X X X X X X X Extracts X X X X ..... y filed and was also assessed under section 143(3) of the Act. In such circumstances, the Assessing Officer had erroneously assumed jurisdiction under sections 147/148/148A on the allegation that income chargeable to tax had escaped assessment for the assessment year 2018-19 because the amalgamating company had not filed its return for the said assessment year. As a pre-condition to invoke jurisdiction u/s 147/148/148A of the Act, the Assessing Officer had to initiate a case that the items of income and expenses mentioned in the annexure to the notice u/s 148A(b) had not been incorporated in the consolidated accounts of the amalgamated company nor had the same been taken into consideration in preparing the income tax return of the amalgamated company for the assessment year 2018-19 resulting in income chargeable to tax in the hands of the amalgamated company escaping assessment. As such, the pre-conditions for invoking jurisdiction to initiate the impugned proceedings are significantly absent in the facts of this case and vitiate the entire proceedings and all the actions taken by the respondent authorities. Period of limitation - grant of opportunity of being heard by service of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... day without waiting for or going through the assessee's response. This is also in violation of the principles of natural justice. Decided in favour of assessee. - THE HON'BLE JUSTICE RAVI KRISHAN KAPUR Mr. J.P. Khaitan , Sr. Adv. Mr. Somak Basu, Adv. Mr. Swagato Kabiraj, Adv. . for the Petitioner. Mr. Tilak Mitra, Adv. for the Respondents. ORDER The Court : 1. The subject matter of challenge in this writ petition is the assumption of jurisdiction under section 147 of the Income Tax Act, 1961 ( the Act ) for the assessment year 2018-19 and initiation of proceedings under section 148A by issuance of the impugned notice dated March 23, 2022 under section 148A(b) culminating in the impugned order dated April 19, 2022 under section, 148A(d) and the consequential notice dated April 19, 2022 issued under section 148 of the Act. 2. Briefly the erstwhile company Gloster Limited ( the amalgamating company ) merged with one Kettlewell Bullen Co. Ltd. ( the amalgamated company ) with effect from January 1, 2015 in terms of an order dated January 19, 2018 passed by the National Company Law Tribunal (NCLT). Subsequently, by a letter dated March 29, 2018, the Assessing Officer of the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business during the financial year 2017-18 but had not filed its return for the assessment year 2018-19. The value of such business transactions was alleged to be Rs.3,71,42,312/- under the broad heads interest and rent (Rs. 2,31,44,245/-), profit from business (Rs.35,25,762/-), salary to employee and payment to contractor (Rs.57,55,445/-) and unverified salary (Rs. 47,16,860/-) without any detailed head-wise break-up. It was alleged that the said sum of Rs. 3,71,42,312/ had escaped assessment because the erstwhile Gloster Ltd. had not filed its return of income for the assessment year 2018-19 and had thereby not made a true and full disclosure of its income. 7. By a letter dated March 30, 2022 the petitioner apprised the Assessing Officer about the amalgamation and contended that all income and expenses of the amalgamating company including those mentioned in the impugned notice under section 148A(b) had been duly included in the consolidated accounts of the amalgamated company for the financial year 2017-18 on the basis of which the amalgamated company had filed its return for the assessment year 2018-19 and had been assessed thereon under section 143(3). In the said reply, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amounts mentioned in the details furnished on April 7, 2022 with the books of accounts. However, due to the sheer volume of transactions comprised in the details provided, the petitioner's response co-relating the amounts also became voluminous. The petitioner started the process of uploading its response in the morning on April 19, 2022 but was unable to complete the same by 11-45 a.m. due to the volume as also a technical glitch which slowed things down on the Income Tax Portal. Consequently, the petitioner was only able to complete the uploading by 6-15 pm on April 19, 2022. 12. It is contended on behalf of the respondents that the impugned order is administrative in nature inasmuch as the revenue authorities seek to reopen an assessment of the assessee and reassess the income of the assessee. Hence, review of the said order is restricted and the Writ Court ought not to go into the merits of the case. To this extent, the grievance of the petition is premature. Moreover, the petitioner has a statutory alternative remedy to challenge the final assessment order at an appropriate stage, if necessary. It is further contended that the assesse had failed to reflect the accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment year and the Assessing Officer has obtained prior approval of the specified authority to issue such notice: [Provided further that no such approval shall be required where the Assessing Officer, with the prior approval of the specified authority, has passed an order under clause (d) of section 148A to the effect that it is a fit case to issue a notice under this section.] 148A. Conducting inquiry, providing opportunity before issue of notice under section 148. The Assessing Officer shall, before issuing any notice under section 148, (a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (b) provide an opportunity of being heard to the assessee, [***] by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amalgamating company carried on business for and on account of and in trust for the amalgamated company. The amalgamating company stood ultimately dissolved in accordance with law on March 30, 2018. For the assessment year 2018-19, the relevant previous year was the financial year 2017-18. The order sanctioning the amalgamation was passed on January 19 2018, i.e. during the previous year. 15. Consequent to the sanction of the amalgamation, for the financial year 2017- 18 relevant to the assessment year 2018-19, consolidated accounts were prepared of the amalgamated company which incorporated all income and expenses of the amalgamating company pertaining to the period from April 1, 2017 to the effective date, March 30, 2018. The return of the amalgamated company for the assessment year 2018-19 relevant to the financial year 2017- 18 was duly filed on the basis of such consolidated accounts. Consequently, the income and expenses referred to in the impugned notice under section 148A(b) stood duly incorporated in such consolidated accounts. A scrutiny assessment under section 143(3) of the Act was made on March 2, 2021 on the basis of such consolidated accounts. This significant jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mated company for the assessment year 2018-19 resulting in income chargeable to tax in the hands of the amalgamated company escaping assessment. As such, the pre-conditions for invoking jurisdiction to initiate the impugned proceedings are significantly absent in the facts of this case and vitiate the entire proceedings and all the actions taken by the respondent authorities. 19. It is apparent that the Assessing Officer did not and could not have any information suggesting that any income chargeable to tax had escaped assessment. The reassessment proceedings initiated by the Assessing Officer are ex facie in excess of jurisdiction and are liable to be quashed. 20. Additionally, there is a serious question of limitation which also justifies quashing of the proceedings. The impugned notice under section 148 of the Act had been issued on April 19, 2022.In terms of section 149(1)(a) of the Act, notice under section 148 for the assessment year 2018-19 could not have been issued after the expiry of three years from the end of the said assessment year, i.e. after March 31,2022. By reason of the third proviso to section 149(1) of the Act, the time or extended time allowed to the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity by the Assessing Officer in terms of clause (b) of section 148A of the Act, which provides for an opportunity of being heard to the assessee.. . 17. Thus, the legal principle that can be culled out from the aforementioned decisions is that the opportunity which is provided for under the scheme of the Act should be a meaningful and effective opportunity as such opportunity is not an empty formality. The assessee is entitled to be heard and such hearing should be a purposeful and effective hearing and not for the sake of showing as if a hearing was conducted. 20. On receipt of such reply, the assessee shall be heard in person either by way of physical hearing or through virtual hearing and after considering the submissions, the replies and the documents filed by the assessee, a reasoned order be passed on merits and in accordance with law. Consequently, the notice issued under section 148 of the Act dated April 13, 2022 shall not be enforced. 22. Section 148A(b) provides for grant of opportunity of being heard by service of a notice to show cause provided a cause is cited within the time specified in the notice, which may vary from a minimum of seven days to a maximum thirty days ..... X X X X Extracts X X X X X X X X Extracts X X X X
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