Court Upholds Validity of Tax Notice; Dismisses Petition on Income Escaping Assessment Due to Fictitious Purchases.

The HC dismissed the writ petition challenging the notice issued under Section 148A(b) of the Income Tax Act, 1961. The court held that the jurisdictional preconditions for issuing the notice were satisfied, as there was information suggesting that income had escaped assessment due to fictitious purchases. The petitioner's objections, including the request for cross-examination, were rejected. The court emphasized that the merits of the information need not be adjudicated at this stage, and the reassessment process under Section 148 is the appropriate forum for such determinations. The proceedings initiated by the Assessing Officer were affirmed as valid.

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Issues Involved:
1. Validity of notice issued under Section 148A(b) of the Income Tax Act, 1961.
2. Consideration of petitioner's objections by the Assessing Officer.
3. Scope of judicial review under Article 226 of the Constitution of India on the order passed under Section 148A(d).

Summary:

Validity of Notice under Section 148A(b):
The petitioner, engaged in the business of trading Arecanut, received a notice under Section 148A(b) suggesting that income chargeable to tax had escaped assessment. The notice was based on information from DGGI and GST authorities indicating that the petitioner had availed fake invoices from M/s Kuhoje K Achumi and M/s Om Traders, entities found to be non-existent at their declared business locations. The petitioner was reported to have made fictitious purchases amounting to Rs. 1,79,68,750/-.

Consideration of Petitioner's Objections:
The petitioner filed detailed objections denying the allegations and requested cross-examination of the suppliers. However, the jurisdictional authority rejected these objections, citing the existence of information suggesting fictitious transactions. Consequently, the purchases were treated as fictitious, and the amount was considered as having escaped assessment for the year 2019-20. The petitioner's request for cross-examination was declined due to the time-barring nature of the matter.

Scope of Judicial Review:
The court emphasized that the scheme for reassessment under the amended sections 147 and 148 of the Income Tax Act, 1961, requires the Assessing Officer to ascertain the existence of information suggesting that income has escaped assessment. The court clarified that the merits of the information need not be adjudicated at this stage. The final determination on whether income has actually escaped assessment is to be made during the reassessment proceedings under Section 148, which is subject to appeal.

The court referred to the Supreme Court's judgment in Red Chilli International Sales vs. Income-tax Officer, which highlighted that the High Court should examine whether the jurisdictional preconditions for issuing a notice under Section 148 are satisfied. The court also cited the judgment in Anshul Jain vs. Pr. CIT, where the Supreme Court held that grievances on merits should be agitated before the Assessing Officer in reassessment proceedings.

Conclusion:
The court concluded that the challenge to the order under Section 148A(d) and the notice under Section 148 lacked merit. The scope of judicial review under Article 226 is limited to the existence of information suggesting that income has escaped assessment. The writ petition was dismissed, affirming the validity of the proceedings initiated by the Assessing Officer.

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