2025 (3) TMI 46 - HC - Income Tax

AO's vague reassessment notice under Section 147 quashed for failing to specify bank details despite closure proof

The HC allowed the writ petition challenging reassessment notice u/s 147. The AO issued notice without specifying the bank name where the alleged account ... Reopening of assessment u/s 147 - Reason to believe - lack of specific information, such as the name of the bank - information relied upon for reassessment and outcome of enquiry if conducted any, is to be supplied - HELD THAT:- From perusal of the reasons annexed with the notice issued under Section 148A(b) of the Act, it is evident that name of the bank in which the account was maintained is not mentioned. Inspite of the mandate of Section 148A of the Act, circulars and guidelines issued by the department that material relied upon should be supplied to the assessee, the casualness in which the reasons are supplied, is evident. Vague information was supplied and in absence of name of bank it becomes impossible for the assessee to file response. AO's decision to proceed with the notice despite the petitioner's objections - The petitioner filed objections denying that the account number does not belong to it, giving details of the bank account with the ICICI Bank which was closed, the proof thereof was annexed. The AO issued notice to the bank on 25.03.2022 and without waiting for reasonable time or giving reminder or making any efforts to verify the fact from the bank, brushed aside the objections stating that no response has been received from the bank. In the reply filed by respondent before this court, the e-mail received from the bank that the account of the petitioner with the ICICI Bank was closed in the year 2010 and further that the account number mentioned in the notice does not exist with the ICICI Bank has not been denied. The e-mail was of April and May, 2022 and respondent filed reply on 22.02.2023 i.e. almost eight months after receipt of the e-mail. In reply filed, there is no pleading that the bank account number mentioned in the notice was of some other bank than ICICI or that there is even a prima-facie material with the department that the bank account mentioned in the notice belonged to the petitioner. There is no reason put-forth for hurriedly passing the impugned order within five days of sending email. The objections were not decided in accordance with Section 148A and the guidelines issued for procedure to be followed in proceedings under Section 148A of the Act. Even before this Court, the department miserably failed to put an iota of evidence to even prima-facie show that the bank account mentioned in the notice belonged to the petitioner and even at this stage, the name of the bank of which account number belongs is not disclosed. WP allowed. ISSUES PRESENTED and CONSIDEREDThe primary legal issue considered was whether the notice issued under Section 148A(b) of the Income Tax Act, 1961, and the subsequent order under Section 148A(d) were valid, given the procedural lapses alleged by the petitioner. Specifically, the questions included:Whether the Assessing Officer (AO) followed the appropriate procedure under Section 148A before issuing the notice under Section 148.Whether the petitioner was given a fair opportunity to respond to the notice, as required by law.Whether the lack of specific information, such as the name of the bank, invalidated the notice.Whether the AO's decision to proceed with the notice despite the petitioner's objections was justified.ISSUE-WISE DETAILED ANALYSIS1. Procedural Compliance under Section 148ARelevant Legal Framework and Precedents: Section 148A of the Income Tax Act requires the AO to conduct an inquiry, if necessary, and provide the assessee with an opportunity to be heard before issuing a notice under Section 148. The AO must consider the assessee's response and decide whether it is a fit case to issue such a notice, with the prior approval of the specified authority.Court's Interpretation and Reasoning: The Court noted that the AO failed to adhere to the procedural requirements outlined in Section 148A. Specifically, the AO did not provide sufficient information to the petitioner, such as the name of the bank where the account was allegedly held, which is crucial for the petitioner to file a meaningful response.Key Evidence and Findings: The petitioner had submitted evidence showing the closure of the ICICI Bank account in 2010, which the AO ignored. Additionally, the AO did not wait for a response from the bank before dismissing the petitioner's objections.Application of Law to Facts: The Court applied the procedural mandates of Section 148A to the facts and found that the AO's actions were not in compliance with the statutory requirements. The AO's failure to provide essential information and to wait for the bank's response before making a decision was deemed procedurally unfair.Treatment of Competing Arguments: The respondent argued that the petitioner did not explain the entries in the account mentioned in the notice. However, the Court found this argument unconvincing as the petitioner had denied the existence of such an account and provided evidence of the closure of their actual bank account.Conclusions: The Court concluded that the procedural lapses, particularly the failure to provide necessary information and the hasty decision-making by the AO, rendered the notice and subsequent order invalid.2. Fair Opportunity to RespondRelevant Legal Framework and Precedents: The principles of natural justice require that an assessee be given a fair opportunity to respond to a notice before any adverse action is taken.Court's Interpretation and Reasoning: The Court emphasized that the petitioner was not given a fair opportunity to respond due to the lack of specific information and the AO's failure to wait for the bank's response.Key Evidence and Findings: The AO issued a notice to the bank on 25.03.2022 but proceeded with the order on 31.03.2022 without awaiting a response. The bank later confirmed that the account in question did not belong to the petitioner.Application of Law to Facts: The Court found that the AO's actions violated the principles of natural justice as the petitioner was not given a reasonable opportunity to address the allegations due to the lack of specific information and the premature decision-making.Treatment of Competing Arguments: The respondent's argument that the petitioner failed to explain the entries was dismissed by the Court, which highlighted the procedural failures and lack of evidence linking the petitioner to the account.Conclusions: The Court held that the lack of a fair opportunity to respond invalidated the notice and the subsequent order.SIGNIFICANT HOLDINGSThe Court quashed the impugned order and allowed the writ petition, emphasizing the need for adherence to procedural requirements under Section 148A. The Court highlighted the following core principles:'The decision that if it is a fit case for issuance of notice under Section 148 is to be taken with prior approval of the specified authority, on the basis of material available on record and after considering the reply filed by the assessee.''Inspite of the mandate of Section 148A of the Act, circulars and guidelines issued by the department that material relied upon should be supplied to the assessee, the casualness in which the reasons are supplied, is evident.''The objections were not decided in accordance with Section 148A and the guidelines issued for procedure to be followed in proceedings under Section 148A of the Act.'The Court's final determination was that the procedural lapses, particularly the failure to provide necessary information and the premature decision-making by the AO, rendered the notice and subsequent order invalid. The writ petition was allowed, and the impugned order was quashed.