Revenue must consider taxpayer's reply before passing Section 148A order or recall proceedings entirely

MP HC ruled on reassessment proceedings validity under amended Section 148A of IT Act. Petitioner claimed reply to show-cause notice was submitted but Revenue denied receiving it. Court found AO failed to consider petitioner's reply before passing order under Section 148A(d), violating procedural requirements. Rather than quashing proceedings entirely, HC adopted middle path directing AO to consider petitioner's reply first. If reply satisfactory, AO must drop Section 148A proceedings and recall order. If unsatisfactory, AO may proceed under Section 148. Court emphasized reasonable opportunity principle underlying Section 148A amendments.

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Issues:
Challenge to order dated 30.06.2022 passed u/s. 148A(d) of the Income-Tax Act, 1961.
Challenge to notice dated 30.06.2022 issued u/s. 148 of IT Act for the assessment year 2014-15.

Challenge to Order and Notice:
The challenge to the order and notice is based on the non-consideration of the petitioner's reply before passing the order u/s. 148A(d) of the Amended IT Act and non-compliance with the order dated 04.05.2022 passed by the Apex Court in Union of India and Ors. Vs. Ashish Agarwal. The Apex Court directed that all Section 148 notices issued under the unamended IT Act should be treated as notices issued u/s. 148A(d) of the amended IT Act. The Assessing Officer was required to provide information and material relied upon by the Revenue to the assessees so they could reply within two weeks. The order was applicable Pan India and governed pending writ petitions challenging similar notices issued after 1-4-2021.

Factual Background:
The Finance Act, 2021 inserted Sec. 148A in the IT Act from 01.04.2021, providing an additional opportunity of being heard in cases of income escaping assessment. A show-cause notice u/s. 148 of the IT Act (Unamended) was issued on 16.04.2020 for the assessment year 2014-15. Subsequently, notices and replies were exchanged between the petitioner and the Revenue, leading to the impugned order and notice dated 30.06.2022.

Petitioner's Contentions:
The petitioner contended that their reply to the show-cause notice dated 19.05.2022 was not considered before the impugned order was passed. The Revenue supplied legible copies of material after the show-cause notice, and the petitioner submitted a detailed reply, which the Revenue claimed they did not receive.

Court's Analysis:
The Court noted that the proceedings under Sec. 148A had commenced, providing the petitioner with a reasonable opportunity to be heard as per the amended IT Act. The Assessing Officer's receipt of the petitioner's reply was disputed, leading to a dilemma regarding the next steps in the proceedings.

Court's Decision:
To expedite the proceedings, the Court directed the Assessing Officer to consider the petitioner's reply to the show-cause notice dated 19.05.2022. If found satisfactory, the proceedings under Sec. 148A were to be dropped, and the order recalled. If unsatisfactory, the Assessing Officer could proceed under Sec. 148 of the amended IT Act, without prejudice from the impugned order and notice.

Conclusion:
The petition was disposed of with directions for the Assessing Officer to review the petitioner's reply before further action under the IT Act. No costs were awarded in the matter.

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