2025 (4) TMI 297 - HC - Income Tax

Delay in filing writ under Sections 147, 148, 148A affects interim relief but not petition validity

All India Trinamool Congress Versus The Assistant Commissioner of Income Tax, Circle 1 (1), Exemption, Kolkata & Ors.

The HC held that delay in filing the writ petition challenging reopening of assessment under Section 147 and notices under Sections 148 and 148A(d) was ... Reopening of assessment u/s 147 - non-compliance of certain terms of Section 13A of the said Act which provides for special provisions related to incomes of political parties and on the ground of information available with the authorities that income had escaped assessment - HELD THAT:- From the disclosure made in the writ petition, it would transpire that in July, 2024, the petitioner had intimated the respondents that it was in the process of challenging the order passed u/s 148A(d) and the notice issued u/s 148 of the said Act, both dated 27th March, 2024 for the assessment year 2017-18. The writ petition had however, not been filed until 17th March, 2025. The aforesaid in our view, is not so fatal to disentitle the petitioner from maintaining the writ petition though the same becomes a relevant consideration for grant of interim relief. Having regard thereto, and considering the fact that the respondents are on the verge of bringing the assessment proceedings to a conclusion, petitioners despite having made out a prima facie case is not entitled to stay of further proceedings, though a limited protection may be afforded. Thus, grant liberty to the petitioner to respond to the notice proposing variation dated 13th March, 2025 by 04:30 p.m. on 29th March, 2025. Accordingly, if such response is filed, the Faceless Assessment Unit shall upon accepting such response and upon providing opportunity of hearing, if sought for, shall take the proceeding under Section 148A of the said Act to its logical conclusion. However, the order if any, to be passed by the Faceless Assessment Unit shall not be communicated to the petitioner, nor shall the same be uploaded or enforced without the leave of this Court. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment include:1. The validity of the notice issued under Section 148 of the Income Tax Act, 1961, for the assessment year 2017-18, and whether it was issued based on proper information that income had escaped assessment.2. The appropriateness of the approval granted under Section 151 of the said Act by the Principal Chief Commissioner of Income Tax, specifically whether the approval process involved adequate consideration of the materials on record.3. The implications of the petitioner's delay in challenging the order and notice under Sections 148A(d) and 148, and whether such delay should affect the relief sought.4. The applicability of Section 13A of the said Act concerning the income of political parties and whether the petitioner complied with the conditions for exemption under this section.ISSUE-WISE DETAILED ANALYSIS1. Validity of Notice under Section 148The relevant legal framework involves Sections 147 and 148 of the Income Tax Act, which allow for the issuance of a notice if there is reason to believe that income chargeable to tax has escaped assessment. The Court examined whether the notice issued was based on substantial information indicating such an escape of income.The petitioner argued that the notice was issued without any valid cause or information, asserting that all conditions under Section 13A were complied with, and the return filed showed a loss, negating the need for exemption under Section 13A. The Court noted that the notice was issued for non-compliance with Section 13A and based on information of income escaping assessment.2. Approval under Section 151The Court scrutinized the approval process under Section 151, focusing on whether the Principal Chief Commissioner of Income Tax adequately considered the materials on record. The petitioner contended that the approval was granted mechanically without considering the reply to the show-cause notice.The Court found that the sanction order did not reflect consideration of the petitioner's response, raising doubts about the application of mind by the sanctioning authority. The Court noted that the records did not show any reflection of the reply, particularly in serial no. 15 of the sanction order, which stated no reply was received.3. Delay in Challenging the NoticeThe petitioner delayed filing the writ petition to challenge the orders and notices, raising the issue of whether such a delay should affect the relief sought. The respondents argued that the delay was unjustified and should preclude relief.The Court considered the delay but determined it was not so fatal as to disentitle the petitioner from maintaining the writ petition. However, the delay was relevant in considering interim relief.4. Applicability of Section 13ASection 13A provides for special provisions related to the income of political parties, exempting certain incomes if specific conditions are met. The petitioner argued compliance with these conditions and that the loss reported negated the need for exemption.The Court acknowledged the petitioner's compliance with Section 13A and noted that the exemption would not have impacted the return showing a loss. This aspect should have been considered by the sanctioning authority.SIGNIFICANT HOLDINGSThe Court held that the approval process under Section 151 lacked proper consideration of the petitioner's response, raising doubts about the validity of the sanction. The Court did not find the delay in challenging the notice fatal to the petitioner's case, allowing the writ petition to proceed.The Court granted the petitioner the opportunity to respond to the notice proposing variation, emphasizing the need for the Faceless Assessment Unit to consider the response and provide a hearing if requested. The final order by the Faceless Assessment Unit, however, cannot be communicated or enforced without the Court's leave.The Court directed the respondents to file an affidavit-in-opposition, with the petitioner allowed to reply, ensuring a thorough examination of the issues raised.