Rajasthan HC upholds Section 147 assessment reopening based on accommodation entries information from investigation wing

The Rajasthan HC dismissed a writ petition challenging reopening of assessment under Section 147. The petitioner contested the Section 148A(b) notice based on information from DDIT (Inv.), Mumbai regarding accommodation entries, claiming denial of oral hearing and non-supply of documents. The HC held that the information about undisclosed transactions with Allbright Electricals Pvt. Ltd. prima facie suggested escaped income. The court ruled that detailed enquiry and minute examination are not required at the Section 148A stage, only prima facie consideration. Since the petitioner admitted to heavy undisclosed transactions, the case for reopening assessment was established. The AO's order was neither non-speaking nor arbitrary, warranting no interference under Article 226.

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Issues Involved:
1. Procedural impropriety and error of law in reopening assessment.
2. Non-supply of documents and denial of personal hearing.
3. Mechanical and non-speaking order by the ITO.
4. Jurisdictional challenge to the reopening of assessment.

Issue-wise Summary:

1. Procedural Impropriety and Error of Law:
The petitioner challenged the reopening of the assessment for the assessment year 2019-20 under Section 148A(d) of the Income Tax Act, 1961. The petitioner argued that the order impugned suffers from procedural impropriety and errors of law and fact. The court noted that the basis for issuing the notice was the information received from DDIT (Inv.), Mumbai, regarding a heavy transaction between the petitioner and Allbright Electricals Pvt. Ltd., which was not reflected in the petitioner's income tax return.

2. Non-supply of Documents and Denial of Personal Hearing:
The petitioner contended that the documents and material records from which the information was extracted were not supplied, violating the mandate of the circular dated 01.08.2022. Additionally, the petitioner was not afforded a personal hearing despite a specific request. The court observed that the petitioner was given an opportunity of being heard and that the purpose of the enquiry under Section 148A is to find out whether any income chargeable to tax has escaped assessment, not to conduct a detailed enquiry.

3. Mechanical and Non-speaking Order by the ITO:
The petitioner argued that the impugned order was mechanical, non-speaking, and did not consider the material objections raised. The court found that the Assessing Officer had prima facie opined that the transaction remained unexplained from the ITR and other financial statements filed by the petitioner. The court held that the reasons assigned by the Assessing Officer, though brief, were sufficient to justify the reopening of the assessment.

4. Jurisdictional Challenge to the Reopening of Assessment:
The petitioner admitted that the transaction in dispute was not reflected in the ITR/audit, which the court found sufficient to make out a case for reopening the assessment under Section 148. The court referred to various judgments, including those of the Supreme Court and High Courts, which held that the writ court should not interfere at a premature stage when the statutory authority has not concluded the proceedings.

Conclusion:
The court dismissed the petition, stating that no case was made out for interference at this stage. The petitioner was given the liberty to raise all submissions regarding the nature of the transactions during the reassessment proceedings, where the Assessing Officer would be duty-bound to address them. The court emphasized that it had not commented on the merits of the assessment and that the petitioner could seek the necessary documents during the reassessment process.

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