Invalidity of Income Tax Notice under Section 148; Set Aside Orders under Section 92-CA(3)

The court held that the notice issued under Section 148 of the Income Tax Act was invalid as it was based on the Revenue Audit's opinion, not the Assessing Officer's independent belief. Consequently, all subsequent orders, including those under Section 92-CA(3), were set aside. The petition was allowed, quashing the notices and orders, with no order as to costs.

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Issues Involved:
1. Validity of notice under Section 148 of the Income Tax Act, 1961.
2. Consequence of setting aside the notice on subsequent orders under Section 92-CA(3).
3. Whether the Assessing Officer (AO) acted independently or under the influence of the Revenue Audit.

Detailed Analysis:

1. Validity of Notice under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 30.03.2019 issued under Section 148 of the Income Tax Act, 1961, which was based on the belief that income chargeable to tax for the Assessment Year 2012-13 had escaped assessment as per Section 147 of the Act. The petitioner argued that the notice was issued based on the dictates of the Revenue Audit, which is not permissible under the law. The court referred to the Supreme Court judgment in Indian & Eastern Newspaper Society Vs. Commissioner of Income Tax, which held that the opinion of internal audit cannot be regarded as "information" under Section 147(d) of the Act. The court emphasized that the AO must independently determine the effect and consequence of the law mentioned in the audit note and cannot rely solely on the audit party's opinion.

2. Consequence of Setting Aside the Notice on Subsequent Orders under Section 92-CA(3):
The petitioner contended that if the court sets aside the notice under Section 148, it would have a cascading effect, nullifying all subsequent orders, including those under Section 92-CA(3). The court agreed, stating that the reasons to believe that income has escaped assessment must be based on the AO's independent evaluation, not on borrowed information. The court cited previous judgments, including Hamilton Housewares (P) Ltd. Vs. Deputy Commissioner of Income Tax, which reiterated that the decision to reopen assessment must be based on the AO's belief, not influenced by the audit party.

3. Whether the Assessing Officer Acted Independently or Under the Influence of the Revenue Audit:
The court scrutinized whether the AO acted independently or merely followed the Revenue Audit's instructions. The court found that the AO issued the notice under Section 148 based on the audit party's objections, which is against the settled legal principle that the AO must form an independent belief. The court referred to the Division Bench judgment in Ananta Landmark (P) Ltd. Vs. Deputy Commissioner of Income-tax, which held that the AO must independently evaluate and decide to issue the notice, not act on the dictates of others.

Conclusion:
The court concluded that the notice issued under Section 148 of the Act could not be sustained as it was based on the Revenue Audit's opinion rather than the AO's independent belief. Consequently, all subsequent orders, including those under Section 92-CA(3), were also set aside. The petition was allowed in terms of prayer clauses (a) and (aa), quashing the impugned notices and orders. The petition was disposed of with no order as to costs.

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