Court quashes invalid tax notice and order due to lack of reasons, jurisdiction issues

The court quashed the notice issued under Section 148 of the Income Tax Act, 1961 and the order rejecting objections to re-open the assessment. The court found that the absence of reasons in the annexure of the notice rendered it invalid. It was concluded that there were discrepancies in the approval process, indicating a lack of proper recording of reasons and application of mind by the Additional Commissioner of Income Tax. As a result, the petition was allowed, and both the notice and order were deemed without jurisdiction, illegal, and invalid in law, leading to their quashing.

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Issues:
The issues involved in the judgment are the validity of a notice issued under Section 148 of the Income Tax Act, 1961 and the rejection of objections to re-open the assessment.

Validity of Notice under Section 148:
The petitioner, an asset reconstruction company, had filed a return of income for Assessment Year 2017-18. The case was selected for scrutiny, and assessment was completed under Section 143(3) of the Act. Subsequently, the petitioner received a notice dated 31st March 2021 stating that the Assessing Officer had reasons to believe that income had escaped assessment for the said year. The petitioner raised concerns regarding the blank annexure in the approval copy provided, which led to doubts about the proper sanction required under Section 151 of the Act. The petitioner contended that the notice and subsequent proceedings were without jurisdiction and invalid in law due to the blank approval copy.

Validity of Approval and Application of Mind:
In response to the petitioner's claims, an affidavit stated that the annexure containing the reasons was not blank and that the reasons were provided to the petitioner later. However, during the hearing, it was revealed that the reasons for re-opening were not available on the Income Tax Portal, raising doubts about the approval process. Discrepancies were noted between the dates on the Form for recording reasons and the approval date available online. The court concluded that there was a lack of proper reasons recorded and application of mind by the Additional Commissioner of Income Tax in granting approval under Section 151 of the Act.

Judgment:
The court found that the absence of reasons in the annexure was a crucial factor leading to the quashing of the notice and the order on objections. Additionally, the court rejected the submissions regarding the proper recording of reasons and application of mind by the Additional Commissioner of Income Tax. Consequently, the petition was allowed, and the impugned notice dated 31st March 2021 and the order dated 11th March 2022 were quashed as being without jurisdiction, illegal, and bad in law. The petition was disposed of accordingly.

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