2020 (3) TMI 884 - HC - Income Tax

Invalid Notice under Section 148: High Court Upholds Tribunal Decision

The Pr. Commissioner of Income Tax, Gurgaon Versus Prahalad Singh

The High Court of PUNJAB AND HARYANA upheld the Tribunal's decision to quash reassessment proceedings due to an invalid notice under Section 148 of the ... Reopening of assessment u/s 147 - HELD THAT:- We find that the order of the Tribunal is correct. The mere fact that reasons exist on the file cannot sanctify them and the only way to ascertain whether the requirements under Section 147 of the Act have been met out would be at the very least that the assessing officer sign the same. Without signatures, the document becomes anonymous piece of paper to which no credence can be given. The action under Section 147 of the Act is quasi-judicial action and if it is permitted that such action can be done as anonymously, it would have very serious consequences in other cases also. If the Court accepts such pieces of paper who can tomorrow stop an assessee from substituting a signed paper with another unsigned paper? Moreover the reasons are undated, hence do not establish that they were recorded prior to issuance of notice. Appeal is dismissed. Issues:1. Validity of notice issued under Section 148 of the Income Tax Act, 1961.2. Justification of quashing reassessment proceedings by the Income Tax Appellate Tribunal.3. Admission of fresh evidence obtained under RTI Act, 2005.4. Classification of land sold during the relevant previous year as a capital asset.Issue 1: Validity of notice under Section 148:The appeal was filed against the order passed by the Income Tax Appellate Tribunal where the Tribunal allowed the appeal filed by the assessee. The Tribunal set aside the proceedings due to unsigned and undated reasons recorded under Section 147 of the Act. The Court emphasized the importance of the assessing officer signing the reasons to ensure the requirements under Section 147 are met. Without signatures, the document lacks credibility, and accepting unsigned reasons could have serious consequences. The Court highlighted that the action under Section 147 is quasi-judicial, and allowing anonymous actions could lead to potential misuse. The undated reasons failed to establish their timeline before the issuance of the notice, leading to the dismissal of the appeal.Issue 2: Quashing of reassessment proceedings:The Tribunal's decision to quash the reassessment proceedings was based on the invalidity of the notice under Section 148. The Court upheld the Tribunal's decision, stating that the mere existence of reasons on file does not validate them if they are unsigned. The Court stressed the necessity of assessing officers signing the reasons to maintain the integrity of the process. Without proper authentication, the document lacks credibility, and accepting such documents could set a problematic precedent. The Court found the Tribunal's decision justified and dismissed the appeal accordingly.Issue 3: Admission of fresh evidence under RTI Act, 2005:The Court addressed the acceptance of fresh evidence obtained under the RTI Act, 2005 after the completion of reassessment proceedings. The Court noted that the evidence obtained was personal information under the RTI Act, 2005, and not a documentary evidence. The Tribunal's decision to admit this evidence was questioned, highlighting the timing of obtaining such information after the completion of reassessment. However, the Court did not delve further into this issue as the primary question regarding the validity of the notice was pivotal in the case.Issue 4: Classification of land as a capital asset:The Court briefly touched upon the classification of the land sold during the relevant previous year as a capital asset. The Tribunal accepted the assessee's argument that the land was not a capital asset, despite the assessee admitting long-term capital gain on the sale of the land in the return filed under Section 148. However, the Court did not provide an in-depth analysis of this issue as the primary question regarding the validity of the notice took precedence in the judgment.In conclusion, the High Court of PUNJAB AND HARYANA upheld the Tribunal's decision to quash the reassessment proceedings due to the invalidity of the notice under Section 148, emphasizing the importance of signed and dated reasons in such cases. The Court dismissed the appeal, highlighting the significance of maintaining the integrity of quasi-judicial actions under the Income Tax Act, 1961.