2024 (2) TMI 344 - HC - Income Tax

Petition challenging reopening of assessment under Section 147 dismissed after proper Section 148-A notice procedure followed

The Bombay HC dismissed a petition challenging reopening of assessment under Section 147. The petitioner received notice under Section 148-A regarding ... Reopening of assessment u/s 147 - Petitioner was served with the impugned notice u/s 148-A alleging therein about incurring huge expenses on marriage of his daughter, which escaped in the assessment within the meaning of Sec. 147 of the Act and called to submit explanation - Prior approval of the specified authority to be taken - Notice was issued to the Petitioner and further he was asked to submit his explanation. After going through the reply of Petitioner, the Respondent was not satisfied. Hence, a reasoned order was passed u/s 148 A(d) of the Act, after following the due procedure. Hence, prayed for dismissal of the petition. HELD THAT:- The issue involved in the present petition is no more res integra. In similar set of facts and circumstances, this Court delivered a Judgment in case of Satguru Sai Extrusions Pvt.Ltd., V/s. Union of India [2024 (2) TMI 50 - BOMBAY HIGH COURT] holding that as per the language of sub-clause (a), the Assessing Officer, before issuing any notice u/s 148-A, shall conduct an enquiry, if required, with the prior approval of the specified authority. The acts to be performed by the Assessing Officer would include conducting of any enquiry, if required. Under clause (b), an opportunity of being heard is to be provided to the assessee. Clause (c) requires that the reply of the assessee has to be taken into account and clause (d) requires an order to be passed for forming an opinion that notice u/s 148 has to be issued on the basis of the material available on record, which includes the reply of the assessee. It is further held that, the words “if required” have been set out in 148A(a) so as to leave it to the discretion of the Assessing Officer as to whether he desires to conduct an enquiry. If the Legislature had the intent and object of mandating an enquiry before issuing a show cause notice under clause (b), the Legislature would not have specifically used the words “if required”, following the words “conduct an enquiry”. In these circumstances, if a harmonious interpretation is to be arrived at without rendering the words “if required” meaningless, in our view, the word ‘shall’ would mean ‘may’ as Section 148A(a) grants discretion to the Assessing Officer to conduct an enquiry. In the case in hand it appears that the Petitioner has filed his returns for the assessment year 2019-2020 which was duly assessed on 23.08.2019. It is not in dispute that on 27th and 28th April, 2019, the marriage of the Petitioner’s daughter was solemnized - Petitioner incurred entire expenditure of the said marriage. According to the Petitioner, he disclosed his entire income for the year 2018-2019 and all source of income to tax and filed ITR within prescribed period. Revenue Authority contended that as per investigation, the Petitioner found evading the Income Tax under “High Risk Transaction CRIU/ VRU” category during search and seizure undertaken u/s 132 of the Act, 1961 and during post search investigation, it was revealed that the Petitioner had booked Resort and Club for wedding event of his daughter and made payment by cheque and cash. Therefore, on 28.03.2023, the Petitioner was served with the notice under Section 148-A of the Act (Annexure P-1) claiming escapement of income chargeable to tax for the assessment year 2019-2020. Along with the notice the Petitioner was also supplied with information forming basis of notice under Section 148A(b). The Petitioner responded to said notice vide communication dated 1st April, 2023 and gave details of his income. So also, produced Statement of Bank Account. On 10th April, 2023, the Respondent No. 1 passed the impugned order holding that, prima facie, income chargeable escaped within the meaning of Sec. 147 of the Act and proposed to re-asses such income and called upon the Petitioner to furnish details/allowances or deduction for the Assessment Year 2019-2020 within 30 days from the service of notice, by order under sub-section (d) of the Sec. 148A of the Act. Therefore, we, however, hold that since Section 148 permits an assessee to raise all issues at the time of the hearing, in view of the pronouncement of the Hon’ble Supreme Court in the case of Anshul Jain (2022 (6) TMI 1310 - PUNJAB AND HARYANA HIGH COURT]. The Respondents shall follow the due procedure laid down in law and ensure that the Petitioner is extended an adequate and reasonable opportunity to contest the notice u/s 148, as is permissible in Law. Issues involved: The issues involved in the judgment are the legality of the show cause notice dated 28th March, 2023, issued under Section 148-A of the Income Tax Act, 1961, and the order dated 10th April, 2023 passed therein.Petitioner's Arguments:The Petitioner, an assessee under the Income Tax Act, disclosed all sources of income for the year 2019-2020, including expenses for his daughter's marriage. The impugned notice alleged tax evasion related to the marriage expenses, but the Petitioner provided explanations and requested a personal hearing, which was not granted. The Petitioner argued that the notice and order were illegal and against the law.Respondent's Arguments:The Respondent, relying on post-search investigation findings, contended that the Petitioner evaded tax by booking a resort for his daughter's wedding and making payments from various sources. The Respondent issued the notice and order under Section 148-A based on this information, claiming that the income had escaped assessment. The Respondent maintained that the actions were legal and proper.Legal Precedents:The Petitioner cited various judgments and orders from different High Courts to support their case, while the Respondent presented findings from a post-search investigation to justify the notice and order issued under Section 148-A.Court's Decision:The Court referred to a previous judgment and emphasized the importance of following due procedure, including providing the assessee with an opportunity to contest the notice under Section 148. The Court held that the Respondents must ensure the Petitioner is given a fair chance to present their case and contest the notice in accordance with the law. The Court disposed of the petition while keeping all contentions open for both parties.Conclusion:The Court's decision emphasized the need for procedural fairness in tax matters and directed the Revenue Authority to provide the Petitioner with a reasonable opportunity to contest the notice issued under Section 148-A. The judgment highlighted the importance of following legal procedures and ensuring that all parties have a fair chance to present their arguments.