Notices under Sections 133(6), 148 Quashed for Ignoring Filed Reply and Procedural Errors

The HC quashed notices issued under Sections 133(6) and 148 of the Act, holding that the petitioner had duly filed a reply which was erroneously ignored due to electronic system errors. The court found the Section 148 notice was issued without proper application of mind, as the alleged escaped income was already disclosed and assessed in the relevant AY. Further, the notices issued by the jurisdictional AO were invalid, relying on precedent that such notices must comply with faceless assessment procedures under Section 144B. Consequently, the proceedings initiated were unsustainable in law, and the writ petition was allowed, setting aside the impugned notices.

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Issues:
Quashing of notices under Section 133 (6) of the Income Tax Act and subsequent notice under Section 148 of the Act for AY 2020-21.

Analysis:
The petitioner, engaged in the sale of medicines and earning commission, filed a reply to a notice under Section 133 (6) disclosing commission income already included in the return. Despite this, a notice under Section 148 was issued assuming undisclosed income. The petitioner argued that the notice was erroneous as the income was declared in the return. The court noted that the reply was indeed filed, and the income was processed and offered for tax, making the notice unjustified.

The court referred to a Supreme Court judgment emphasizing the need for a rational connection between material and belief in income escapement. The petitioner's counsel argued that the notice under Section 148 was issued erroneously, as the income was disclosed in the return and a reply was submitted to the initial notice. The court found the notice to lack application of mind and be unsustainable in law.

The court highlighted a similar case in the Bombay High Court where the government's power to demand information under the Income Tax Act was to be exercised cautiously. In this case, the petitioner's reply to the notice under Section 133 (6) was ignored, leading to the unjustified issuance of a notice under Section 148. The court concluded that the impugned notice lacked proper application of mind and was therefore quashed.

Additionally, the court noted jurisdictional issues in the issuance of notices, citing a previous judgment. It emphasized the need to strictly follow statutory provisions and not override them with circulars or instructions. The court quashed all impugned notices and subsequent proceedings, allowing the revenue to proceed as per the law.

In conclusion, the court allowed the writ petition, disposed of pending applications, and did not award any costs. The quashed notices under Section 133 (6) and 148 of the Income Tax Act, along with any related proceedings, were deemed unsustainable in law.

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