Income-tax reassessment notice u/s148 challenged over mechanical s.151 approval despite taxpayer reply; proceedings quashed

Reopening under the Income-tax Act was challenged on the ground that the mandatory approval under s.151 for issuance of notice under s.148 was vitiated by non-application of mind. The HC held that the approving authority granted sanction mechanically: although the taxpayer's reply was scanned and reproduced in the draft order under s.148A(d), the order simultaneously recorded in the prescribed column that no reply had been filed, revealing that the draft was not properly examined. Reliance on SC precedent was rejected as it did not permit jurisdictional action without due application of mind. Consequently, the order under s.148A(d) and the notice under s.148 were quashed and the writ petition was allowed.

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Issues:
Challenge to impugned orders under Sections 148A(d) and 148 of the Income Tax Act for Assessment Year 2020-21.

Analysis:
The petitioner, a scrap dealer and sole proprietor of a firm, filed an Income Tax Return for Assessment Year 2020-21, which was accepted. However, a notice under Section 148A(b) was issued alleging involvement in bogus purchases from another company. The petitioner provided detailed replies, submitted tax invoices, e-way bills, and evidence of transactions made through bank accounts, denying any fraudulent activities. Despite this, an order under Section 148A(d) was issued without considering the petitioner's response. The Principal Commissioner of Income Tax approved the order under Section 151 without properly reviewing the petitioner's submissions, indicating a lack of application of mind.

The High Court noted the non-application of mind in granting approval under Section 151 of the Act and considered additional grounds raised by the petitioner challenging the impugned orders. The petitioner argued based on the scheme notified by the Central Government under Section 151A and judgments from various High Courts emphasizing that if the sale of purchased material is not questioned, the purchase cannot be deemed fake. The opposite parties contended that the order under Section 148A(d) only reopens assessment and assured proper opportunities for the assessee during reassessment proceedings, citing the judgment of the Supreme Court in Raymond Woolen Mills Limited Vs. Income Tax Officer.

While acknowledging the judgment cited by the opposite parties, the High Court found that it did not support issuing notices and orders without due application of mind and jurisdiction. Consequently, the High Court quashed the order under Section 148A(d) and the notice under Section 148, remitting the matter back to the authorities to reconsider the petitioner's response, which was quoted in the impugned order but not adequately considered. As a result, the writ petition was allowed, granting relief to the petitioner.

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