Petition Challenging 2018-2019 Tax Reassessment Dismissed; Court Finds No Procedural Violations in Notice u/s 148A(b.

The HC dismissed the writ petition challenging the reopening of the assessment for the year 2018-2019. The petitioner argued against the validity of the notice under Section 148A(b) of the Income Tax Act, 1961, citing procedural impropriety. However, the court held that the petitioner was given due opportunity to respond, and no procedural violations were found. The court emphasized that the sufficiency of the material is not to be considered at this stage and allowed the petitioner to raise objections during reassessment proceedings. The petitioner retains the right to challenge the merits of the case in subsequent proceedings.

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Issues Involved:
1. Legality of reopening the assessment for the assessment year 2018-2019.
2. Validity of the notice issued under Section 148A(b) of the Income Tax Act, 1961.
3. Examination of the material basis for reopening the assessment.
4. Procedural propriety and statutory compliance in issuing the notice under Section 148 of the Act.

Summary:

1. Legality of Reopening the Assessment:
The petitioner argued that the reopening of the assessment for the assessment year 2018-2019 is illegal, without jurisdiction, and void ab initio. The petitioner had submitted its return of income and a regular assessment order was passed under Section 143(3) of the Income Tax Act, 1961 on 15.07.2021. The return of income was filed under Section 139 of the Act on 30.10.2018, declaring an income of Rs.42.44 crores, and the assessment was completed with certain ad hoc disallowances.

2. Validity of Notice under Section 148A(b):
A notice under Section 148A(b) was issued on 10.03.2022, providing an opportunity of hearing against the proposed reopening of the assessment based on information from a search and survey action under Sections 132 and 133 of the Act on M/s APCO Infratech Private Limited and associates. The petitioner contended that all relevant documents and transactions were disclosed during the original assessment, and the reopening was without legal authority.

3. Examination of Material Basis for Reopening:
The respondent argued that during the search and survey on M/s APCO Infratech Private Limited, it was revealed that transactions between the petitioner and M/s APCO Infratech Private Limited were circular in nature, involving fake invoices. This provided a basis for invoking Section 148A of the Act. The petitioner was given an opportunity to respond, and a detailed order under Section 148A(d) was passed after considering the reply.

The court noted that the search and survey action conducted on 15.09.2021 revealed circular transactions and bogus bills between the petitioner and M/s APCO Infratech Private Limited. The competent authority found that invoices of almost identical amounts were raised at the end of the financial year, raising suspicion of fictitious transactions to inflate turnover and improve credit ratings. The petitioner failed to provide satisfactory documentary evidence of executing sub-contracts or producing bills and vouchers, justifying the reopening of the assessment.

4. Procedural Propriety and Statutory Compliance:
The petitioner relied on the judgment in Micro Marbles Private Limited vs. Office of the Income Tax Officer, where reopening was found vitiated due to non-supply of material referred to in the "reasons to believe." However, in this case, the petitioner was given due opportunity of hearing, and a detailed order under Section 148A(d) was passed.

The court referenced several judgments, including Raymond Woollen Mills Limited vs. Income Tax Officer and Rasulji Buxji Kathawala vs. Income Tax Commissioner, emphasizing that the sufficiency or correctness of the material is not to be considered at this stage. The court cannot strike down the reopening based on prima facie material. The petitioner has the opportunity to challenge the merits during reassessment proceedings.

The court concluded that no procedural impropriety or statutory violation was alleged in the initiation of proceedings or the order under Section 148A(d). The consistent legal position is that the writ court should not interfere at a premature stage, and the petitioner has adequate remedies under the Act.

Conclusion:
The writ petition was dismissed, with the petitioner given liberty to raise all objections during the reassessment proceedings subsequent to the notice under Section 148 of the Act.

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