Reassessment proceedings under Section 148 quashed for non-compliance with mandatory Section 148A procedure requirements

HC quashed reassessment proceedings initiated under Section 148 issued on 09.06.2021. The revenue failed to follow mandatory procedure under Section 148A, which came into effect from 01.04.2021, requiring prior approval, show-cause notice, and opportunity of hearing before issuing Section 148 notice. The court held that non-compliance with Section 148A provisions violated natural justice principles, vitiating entire proceedings. Additionally, revenue failed to provide material and documents relied upon despite Supreme Court directions in Ashish Agarwal case. Matter remitted back to revenue authorities to treat existing notice as Section 148A notice and proceed afresh following proper procedure.

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Issues Involved:
1. Validity of Notice under Section 148 of the Income Tax Act, 1961.
2. Compliance with amended provisions under Sections 147 to 149 and 151 of the Income Tax Act, 1961.
3. Availability of alternate remedy under Section 246A of the Income Tax Act, 1961.
4. Principles of natural justice.

Summary:

1. Validity of Notice under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice issued under Section 148 on 09.06.2021 and the assessment order dated 30.03.2022, arguing that the notice was issued without following the amended procedure under Section 148A. The court noted that the amended provisions, effective from 01.04.2021, require compliance with Section 148A before issuing a notice under Section 148. The respondents did not dispute that no proceedings under Section 148A were initiated before issuing the notice under Section 148.

2. Compliance with amended provisions under Sections 147 to 149 and 151 of the Income Tax Act, 1961:
The court highlighted that the amended provisions under Sections 147 to 149 and 151 came into force on 01.04.2021. The notice issued on 09.06.2021 did not comply with the mandatory procedures under Section 148A, which include conducting an enquiry, providing an opportunity of being heard, and passing an order under Section 148A(d) before issuing a notice under Section 148. The court emphasized that these provisions provide safeguards to the assessee and must be followed in their letter and spirit.

3. Availability of alternate remedy under Section 246A of the Income Tax Act, 1961:
The respondents argued that the writ petition should be dismissed due to the availability of an alternate remedy under Section 246A. However, the court referred to the Supreme Court decisions in Harbanslal Sahnia and Commercial Steel Limited, which state that the existence of an alternate remedy is not an absolute bar to the maintainability of a writ petition under Article 226. The court found that the case involved a violation of the principles of natural justice and thus fell within the exceptions allowing for writ jurisdiction.

4. Principles of natural justice:
The court determined that the notice issued under Section 148 without following the procedure under Section 148A violated the principles of natural justice. The assessment order was passed without providing the petitioner with the necessary information and material relied upon by the Revenue, further violating natural justice principles.

Conclusion:
The writ petition was allowed, and the assessment order dated 30.03.2022 was set aside. The matter was remitted back to the respondents to decide the case afresh, treating the notice issued under Section 148 as a notice under Section 148A, and to proceed in compliance with the provisions of Section 148A, considering the Supreme Court's decision in Ashish Agarwal.

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