Court sets aside Section 148 notice for lack of inquiry, directs fresh assessment order

The Court set aside the notice issued under Section 148 of the Income Tax Act for Assessment Year 2018-19, citing lack of independent inquiry by the Respondent and failure to consider detailed replies of the Petitioner-Company. The Assessing Officer was directed to issue a fresh reasoned order considering the submissions and evidence provided by the petitioner. The Court clarified that its decision did not address the merits of the controversy, preserving the rights and contentions of all parties for future proceedings.

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Issues:
Challenge to notice under Section 148 of the Income Tax Act for Assessment Year 2018-19 based on borrowed satisfaction and lack of independent inquiry by Respondent No.1. Allegation of not considering detailed replies of the Petitioner-Company leading to the order under Section 148A(d) of the Act and consequential notice under Section 148 being set aside.

Analysis:
The petitioner filed a writ petition challenging the notice dated 31st March, 2022 issued by Respondent No.1 under Section 148 of the Income Tax Act for the Assessment Year 2018-19. The petitioner's counsel argued that the case was reopened based on borrowed satisfaction without an independent inquiry by Respondent No.1. It was contended that the information relied upon was from the Risk Management Strategy of the Income Tax Department, and no effort was made to verify if there was any income escapement. Additionally, it was highlighted that the detailed replies of the Petitioner-Company dated 19th March, 2022 and 24th March, 2022 were not considered by Respondent No.1 when issuing the order under Section 148A(d) of the Act and the consequential notice under Section 148.

During the proceedings, the respondent's counsel sought additional time to obtain instructions, but the Court noted that sufficient time had already been given. Consequently, the Court decided to believe the averments in the writ petition. Based on the belief that the petitioner's contentions were true, the Court set aside the impugned order and notice under Section 148 of the Act. The reason cited was that the Assessing Officer failed to consider the replies, documents, and evidences submitted by the petitioner.

As a result of the decision, the Assessing Officer was directed to issue a fresh reasoned order under Section 148A(d) of the Act, taking into account the submissions and evidence provided by the petitioner in their replies. The writ petition and pending applications were disposed of with this direction. Importantly, the Court clarified that its decision did not touch upon the merits of the controversy, leaving the rights and contentions of all parties open for future proceedings.

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