2023 (6) TMI 134 - HC - Income Tax

Post-survey findings can indicate escaped income, justifying issuance of notices under section 148A(b); applicability of amended s.149 questioned.

The HC held that information emerging from a post-survey disclosure can constitute information suggesting escaped income, justifying issuance of notices ... Validity of Reopening of assessment - Time Limit for Notice - two consequential notices issued - as submitted reassessment proceeding has been triggered pursuant to a survey carried out against the petitioner - HELD THAT:- Information which emerged post the survey would be deemed to be considered as information, suggesting that income chargeable to tax has escaped assessment. As also since clause(a) to the first proviso appended to Section 148A does not refer to “survey”, the regime provided u/s 148A had to be applied to the petitioner, which is why notices were issued u/s 148A(b) of the Act. What emerges from the record is that, clearly, two notices were issued u/s148A(b) i.e., notice dated 28.03.2023 and 29.03.2023. What has also emerged is that the entire survey report was not submitted to the petitioner, since Mr Agarwal, during the course of his submissions, has said that the relied-upon portion of survey report was provided to the petitioner. Also submitted that information came to the fore only on 07.09.2022, when the survey was conducted, i.e., after the Finance Act 2022 kicked in. Petitioner submits that the expenditure was incurred prior to 01.04.2022, and therefore, the unamended provisions would apply and consequently, proceedings would be time-barred. In support of his plea, has relied upon Instruction No.1/2022 dated 11.05.2022 and the Memorandum Explaining the Provisions in the Finance Bill 2022. According to us, the matter requires examination. Besides this, as noticed above, it is, at least, prima facie, evident to us that Section 149 of the Act, as amended, may not be applicable. List the matter on 22.11.2023. Issues involved:The writ petition concerns Assessment Year 2016-17 challenging notices issued under Section 148A(b) of the Income Tax Act, 1961, order passed under Section 148A(d) of the Act, and consequential notice issued under Section 148 of the Act.Assailed Notices and Orders:The petitioner challenged the notices dated 28.03.2023 and 29.03.2023 issued under Section 148A(b) of the Act, the order dated 19.04.2023 passed under Section 148A(d) of the Act, and the consequential notice dated 19.04.2023 issued under Section 148 of the Act. The reassessment proceeding was triggered following a survey conducted against the petitioner.Contentions and Submissions:The petitioner contended that the entire survey report, forming the basis for the reassessment proceeding, was not furnished, leading to a breach of natural justice. The petitioner also argued that the amended provision of Section 149 of the Act, post the Finance Act 2022, was erroneously applied to transactions related to AY 2016-17, which were incurred prior to the amendment.Legal Arguments:The respondents argued that the survey information post-amendment should be considered for reassessment under clause(ii) of Explanation 2 of Section 148 of the Act. They maintained that the notices were issued under Section 148A(b) of the Act due to the absence of 'survey' in the relevant clause. The respondents claimed that the information emerged after the survey conducted post the Finance Act 2022.Court's Observation and Direction:The Court noted discrepancies in the application of the amended Section 149 of the Act to the petitioner and directed further examination of the matter. The Court issued notice to the respondents, accepting notice on their behalf. Counter-affidavit and rejoinder were ordered to be filed within specified timelines, with the case listed for further hearing on a specific date. A stay was granted on the continuation of reassessment proceedings until further court directions.Conclusion:The judgment highlighted the disputed notices and orders under the Income Tax Act, 1961, focusing on the challenges raised by the petitioner regarding the survey report, application of amended provisions, and the timeline for reassessment. The Court's direction for further examination and stay on reassessment proceedings reflects the need for a detailed review of the legal aspects involved in the case.