2026 (3) TMI 638 - HC - Income Tax

Cross-examination rights: not available at the Section 148A preliminary stage; entitlement arises at reassessment under Section 147.

At the preliminary enquiry under Section 148A the assessor may consider statements recorded under search provisions as part of the material to form prima ... Validity of reassessment order passed u/s 148A(d) - scope of reopening proceedings u/s 147 v/s proceedings u/s 148A - whether assessee is entitled to cross-examine a person whose statement u/s 132(4) is relied upon by the AO. HELD THAT: - The scope of reopening proceedings under Section 147 of the Income Tax Act, 1961 is different from that of proceedings under Section 148A. While a proceeding under Section 147 involves a final and conclusive determination with regard to escapement of income, the proceeding under Section 148A is only for the purpose of arriving at a prima facie satisfaction to initiate proceedings under Section 147 of the Income Tax Act, 1961. As at the stage of passing an order under Section 148A, cross-examination of a person whose statement has been relied upon is not required. Such cross-examination would become necessary only at the stage when an order under Section 147 of the Income Tax Act, 1961 is to be passed and the statement is relied upon by the Assessing Officer. Merely because the Assessing Officer asked Amit Kumar Agarwal to appear before him for the purpose of cross-examination, it cannot be said that he was under any obligation under Section 148A of the Income Tax Act, 1961 to complete the process of cross-examination. Final Conclusion: The writ petition challenging the order under Section 148A(d) was dismissed; the High Court held that Section 148A requires only a prima facie satisfaction to reopen and does not mandate cross-examination of a witness at that stage, while directing that the petitioner be afforded opportunity for cross-examination in the further course of proceedings. Issues: Whether, at the stage of passing an order under Section 148A of the Income-tax Act, 1961, the assessee is entitled to cross-examine a person whose statement under Section 132(4) is relied upon by the Assessing Officer.Analysis: Section 148A requires the Assessing Officer to conduct any necessary enquiry, issue a show-cause notice, consider the assessee's reply and decide, on available material, whether to issue a notice under Section 148. The proceeding under Section 148A is aimed at forming a prima facie satisfaction to initiate reassessment under Section 147 and is distinct from the final determination under Section 147. The statement recorded under Section 132(4) may form part of the material considered at the 148A stage, but a final conclusion on escapement of income is not required at that stage. The requirement of cross-examination of a person whose statement is relied upon becomes relevant when the Assessing Officer proposes to pass a reassessment order under Section 147 and relies on that statement for a conclusive finding.Conclusion: Held that cross-examination of a person whose statement under Section 132(4) is relied upon is not required at the stage of passing an order under Section 148A of the Income-tax Act, 1961; entitlement to cross-examination arises at the reassessment (Section 147) stage. This conclusion is against the assessee and in favour of the revenue.