2022 (9) TMI 1573 - HC - Income Tax

Tax Notice Overturned: Revenue Must Provide Details for Fair Response Under Income Tax Act, Fresh Order Required.

MAHASHIAN DI HATTI PVT. LIMITED Versus DEPUTY COMMISSIONER OF INCOME TAX

The HC set aside the impugned orders under Section 148A(b) of the Income Tax Act, 1961, due to insufficient detail in the notices, which denied the ... Reopening of assessment u/s 148A - Assessee-Company had taken entries from twenty-eight bogus entities maintained by one accommodation entry provider - Petitioner contends that there has been violation of principles of natural justice as the Petitioner has been denied an effective opportunity to rebut the information available with the Asseesing Offcer - HELD THAT:- This Court has consistently observed that to give effect to the objective of the scheme of Section 148A, AO must provide specific material and information to the Assessee in the notice issued u/s 148A(b) so that the Assessee can provide a meaningful response at the stage of inquiry u/s 148A proceedings. Consequently, as the show cause notice issued u/s 148A(b) of the Act as well as the subsequent notice are bereft of any details, this Court is of the view that the Revenue by asking the Petitioner-Assessee to respond to the aforesaid vague show cause notice was virtually asking the Petitioner to search for ‘a needle in a haystack’. As Revenue now states that the Respondent shall supply all the relevant material documents and information in its possession, the impugned order passed u/s 149A(d) as well as the notice issued u/s 148 are set aside with a direction to Revenue to issue a supplementary notice in pursuance to the initial notice issued u/s 148A(b) within three weeks enclosing all the relevant/incriminating information/material/documents. AO is directed to pass a fresh order under Section 148A(d) in accordance with law within six weeks thereafter. Issues:Challenge to notice under Section 148A(b) of the Income Tax Act, 1961 for Assessment Year 2014-15.Detailed Analysis:The petitioner filed a writ petition challenging a notice issued under Section 148A(b) of the Income Tax Act, 1961, and subsequent orders. The petitioner argued that the respondent failed to comply with a Supreme Court direction, making allegations without supporting evidence. The notices alleged the petitioner received entries from bogus entities without specifying details, denying the petitioner a chance to respond effectively. The petitioner contended a violation of natural justice principles due to lack of opportunity to rebut information held by the Assessing Officer.The Respondent-Revenue argued that the petitioner received accommodation entries from a specific bogus entity and provided bank details. The Court emphasized the necessity for specific material in notices under Section 148A(b) to enable meaningful responses. Referring to a previous case, the Court highlighted the importance of sharing information with the assessee for an effective opportunity to respond. Due to the lack of details in the notices, the Court found the petitioner was asked to respond to vague allegations, akin to searching for 'a needle in a haystack.'The Court set aside the impugned orders and directed the Revenue to provide all relevant material within three weeks for the petitioner to respond. The Assessing Officer was instructed to pass a fresh order within six weeks thereafter. The Court clarified that it did not comment on the merits of the case, leaving the rights and contentions of all parties open. The writ petition and pending application were disposed of with these directions.