2025 (11) TMI 52 - HC - Income Tax

Reassessment under section 148 not permissible for matters already examined under section 143(3) or earlier section 148

Logix Heights Private Limited Versus Deputy Commissioner of Income Tax Circle 13 (1), Delhi & Anr.

HC held reassessment under section 148 cannot be initiated for issues already examined under section 143(3) or earlier section 148 proceedings. The court ... Reopening of assessment u/s 147 - reassessment proceedings has been initiated u/s 148A on the basis of impugned information about alleged non-genuine transactions - HELD THAT:- Reassessment proceedings u/s 148 cannot be initiated for the issue already examined by the department either u/s 143(3) or u/s 148 of the Act. Further detail/documents as annexed with the notice, nowhere suggest that there was/were transactions between the assessee and impugned party. Therefore, your honour is requested to provide us complete information in respect of impugned sum. The assessee reiterates that there is no escapement of income as alleged in the notice as the transactions between the assessee and M/s. Mekaster Finlease Ltd. has already been held as accommodation entries by the department vide impugned order u/s 147 of the Act. We set aside the impugned order u/s 148A(3) of the Act and the notice u/s148 and remand the matter back to the AO who by providing opportunity of being heard to the petitioner and also permitting the petitioner to produce all such documents as deemed appropriate in support of its stand taken in its reply. ISSUES PRESENTED AND CONSIDERED 1. Whether the order under Section 148A(3) and consequent notice under Section 148 were valid where the Assessing Officer purportedly did not consider material objections/representations filed by the assessee challenging reopening on identical facts already adjudicated in earlier proceedings. 2. Whether reassessment proceedings under Section 148 can be initiated on an identical issue already examined and adjudicated by the department (including by an NFAC) without addressing the assessee's specific submissions and documents. 3. Whether remedial relief in the form of setting aside the Section 148A(3) order and the Section 148 notice and remanding the matter to the AO for fresh consideration and hearing is appropriate where the AO has not recorded a fresh, reasoned order after permitting production of documents and hearing. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Validity of Section 148A(3) order and Section 148 notice where AO allegedly failed to consider assessee's objections/representations Legal framework: Section 148A(1) requires issuance of notice to taxpayer when assessing officer proposes reassessment; Section 148A(3) obliges the AO to consider the representations of the assessee and pass an order with reasons before issuing notice under Section 148. Principles of reasoned decision-making and audi alteram partem apply. Precedent Treatment: The judgment does not rely upon or distinguish any prior precedent; analysis proceeds on statutory requirements and established administrative law principles requiring consideration of objections and opportunity of hearing. Interpretation and reasoning: The Court noted that the assessee had filed specific, cogent objections (including reference to an earlier NFAC order, confirmations, bank statements and ITRs) requesting further particulars and adjournment to file reply. The AO's impugned order under Section 148A(3) did not adequately consider these representations as reflected on the record. Where statutory procedure mandates consideration of the assessee's reply, failure to do so renders the order vitiated by lack of adequate reasoning and non-application of mind. Ratio vs. Obiter: Ratio. The Court's setting aside of the order proceeded on the essential legal principle that an order under Section 148A(3) must record consideration of the assessee's objections and grant opportunity to produce documents and be heard; absence of such consideration is a jurisdictional defect. Conclusion: The Section 148A(3) order was set aside because the AO did not properly consider the specific objections and documents placed on record by the assessee; corresponding relief was granted. Issue 2 - Permissibility of reopening on an identical issue already examined and adjudicated Legal framework: Reopening under Section 148 is constrained by the requirement that there be reason to believe income has escaped assessment; administrative fairness requires that where the same issue has already been examined and concluded in prior proceedings, the AO must address why reopening is justified and take into account earlier adjudication. Precedent Treatment: No precedents were invoked or overruled in the judgment; the Court applied statutory and procedural safeguards to the facts before it. Interpretation and reasoning: The assessee contended that the identical issue (alleged non-genuine/accommodation transactions) had been adjudicated and assessed under earlier proceedings, and that relevant documents and verifications were already on record. The Court observed that the AO should specifically address the fact of prior adjudication and the assessee's supporting documents when proposing reassessment on the same issue; mere issuance of fresh notice without considered reasons in that context is impermissible. Ratio vs. Obiter: Partial ratio. The Court's direction emphasizes that reopening on an identical issue requires the AO to confront and record reasons addressing prior adjudication and the assessee's representations; failure to do so will invalidate the order. Conclusion: Reopening on an identical issue without addressing earlier adjudication and the assessee's submissions is improper; the matter must be reconsidered with proper application of mind. Issue 3 - Appropriate remedial relief where AO's order is deficient Legal framework: Where a statutory order is procedurally defective or not reasoned, the Court may set it aside and remit the matter for fresh consideration after affording opportunity of hearing and permitting production of documents; remedial directions often include timelines to ensure expedition. Precedent Treatment: The Court did not cite authority but applied standard judicial supervisory power to ensure statutory compliance and fair procedure. Interpretation and reasoning: Given the AO's omission to consider the assessee's detailed reply and documents and the fact that the revenue did not contest that the objection was not considered, the Court found remand appropriate. The Court directed setting aside of the impugned Section 148A(3) order and Section 148 notice and ordered the AO to decide afresh after hearing and permitting production of documents, within an outer limit of eight weeks. Ratio vs. Obiter: Ratio. The remedial order is dispositive and necessary to cure the procedural defect identified; it establishes the required course of action in such circumstances. Conclusion: The Section 148A(3) order and consequent Section 148 notice were set aside; matter remanded to AO to pass a fresh, reasoned order after providing hearing and permitting documentary production, to be completed within eight weeks, after which parties to proceed according to law. Cross-references and Interrelationship of Issues The issues are interlinked: the procedural infirmity in Issue 1 (failure to consider objections) and the substance of Issue 2 (reopening on an issue already adjudicated) together justified the remedial course in Issue 3 (setting aside and remand). The Court's order requires the AO on remand to address both the procedural lapse and the substantive question of whether reopening is warranted despite prior adjudication.