HC quashes Section 148A proceedings for ignoring taxpayer objections and exceeding Rs 50 lakh limitation threshold

The HC quashed reopening proceedings under Section 148A for failure to consider the petitioner's reply-cum-objection, violating natural justice principles and mandatory procedural requirements. The court held that the AO must consider assessee's objections as per Section 148A(c). Additionally, since the escaped income was Rs. 32.68 lakhs (petitioner's 50% share from joint property sale), below the Rs. 50 lakh threshold under Section 149(1)(b), the extended limitation period could not be invoked. The assessment proceedings were deemed barred by limitation and beyond jurisdiction, resulting in quashing of the entire enquiry proceeding and Section 148 notice.

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Issues Involved:
1. Non-consideration of the petitioner's reply under Section 148A.
2. Jurisdictional and time-barred nature of proceedings under Section 148 and 149.

Summary:

Issue 1: Non-consideration of the petitioner's reply under Section 148A

The petitioner sought to quash the assessment proceedings, arguing they were void ab initio due to non-compliance with Section 148A. The petitioner received notices under Section 148A(a) and 148A(b) but contended that their reply was not considered, violating principles of natural justice. The respondents admitted that the petitioner's reply was not considered due to a technical issue, thus violating mandatory procedures under Section 148A. The court emphasized that the Assessing Officer must consider objections as per the Supreme Court's judgment in GKN Driveshafts (India) Limited v. ITO, which mandates a specific procedure for handling objections to notices under Section 148.

Issue 2: Jurisdictional and time-barred nature of proceedings under Section 148 and 149

The petitioner argued that the proceedings were beyond jurisdiction and time-barred under Section 149, as the income escaping assessment was less than Rs. 50 lakhs. The property was jointly owned by the petitioner and his brother, with each having a 50% share, making the petitioner's share Rs. 32,68,000, which is below the Rs. 50 lakhs threshold. The respondents admitted this fact, acknowledging that only half of the consideration was chargeable to tax. The court noted that Section 149(1)(b) could not be invoked as the income escaping assessment was less than Rs. 50 lakhs, rendering the proceedings barred by limitation and beyond jurisdiction. The court also referenced Section 26 of the Income Tax Act, which supports the petitioner's claim of a definite and ascertainable share in the property.

Conclusion:

The court concluded that the assessment proceedings were barred by limitation and beyond jurisdiction. Consequently, the entire enquiry proceedings, the order under Section 148A(d), and the notices issued under Sections 148A(a), 148A(b), and 148 were quashed and set aside. The application was allowed, and any pending interlocutory applications were closed.

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