Dismissed

Shanti Timbers Traders v. Union of India

Chhattisgarh HC11 Jul 2024WPT/76/2024

Case brief

AI extract

What is this about?

The High Court dismissed the writ petition challenging the Assessing Officer's order under Section 148A(d) and the notice under Section 148 of the Income Tax Act. The Court held that writ jurisdiction at this stage is limited to verifying the existence of information suggesting escaped assessment. It is not appropriate to adjudicate merits or sufficiency of material before the statutory reassessme

What did the court decide?

Writ petition dismissed at admission stage, liberty granted to avail statutory alternative remedy.

Shanti Timbers Traders Vs Union of India — Income Tax | Chhattisgarh HC (2024)

2024:CGHC:50611

NAFR

HIGH COURT OF CHHATTISGARH AT BILASPUR

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WPT No. 76 of 2024

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1 - Shanti Timbers Traders Having Its Office At Bilaspur Road, Bhanpuri, Raipur, Distt. Raipur, Pin 492001, Chhattisgarh Through Its Partner Mr. Harish Patel Aged About 38 Years S/o Karsau Bai Patel, R/o Bhanpuri, Raipur, Distt. Raipur, Pin 492001, Chhattisgarh

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... Petitioner(s)

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versus

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1 - Union Of India Through Secretary Ministry Of Finance, Department Of Revenue, North Block, New Delhi 110001, India

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2 - Income Tax Officer Ward 1(2), Raipur, Office Of Income Tax Officer, Ward 1(2), Raipur, Central Revenue Building, Rai02, Rai03, Rai04, Raipur, Distt. Raipur, Chhattisgarh, 492001

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3 - Principal Commissioner Of Income Tax Raipur-1, Office Of The Principal Commissioner Of Income Tax Pcit, Raipur-1, Central Revenue Building, Rai02, Rai03, Rai04, Raipur, Distt. Raipur, Chhattisgarh, 492001

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... Respondent(s)

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For Petitioner(s) : Mr. Siddharth Dubey, Advocate. For Respondent(s) : Ms. Naushina Afrin Ali along with Mr. Ajay Kumrani, appearing on behalf of Mr. Amit Choudhari, Advocate.

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Hon’ble Shri Justice Ravindra Kumar Agrawal, J.

Order on Board

12/07/2024

Heard.

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The petitioner has assailed the notice dated 30.03.2024 issued under Section 148 of the Income Tax Act (Annexure P/4) along with order under Section 148A(d) of the Income Tax Act, 1961 dated 30.03.2024 (Annexure P/3) and Notices dated 08.03.2024 and 15.03.2024 issued under Section 148A(b) of the Income Tax Act 1961 (Annexure P/1).

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The facts of the present case are that the petitioner is a partnership firm engaged in manufacturing and trading of plywood and is an assessee for the purpose of Income Tax Act, 1961 who had filed its return for the assessment year 2019-20 declaring a total income of Rs. 9,780 and is having permanent account number AAUFS9218E. T he assessee/petitioner was issued a show-cause notice under Section 148A(b) of the Act along with a brief note/satisfaction, information and document(s) for Assessment Year 2020-21 (Financial Year 2019-20) on 08/03/2024, which formed the basis of issuance of the aforesaid show-cause notice. The aforesaid notice stated that the assessing officer has information which suggests that income chargeable to tax has escaped assessment. Another show-cause notice under Section 148A (b) of the Income Tax Act, 1961 was issued on 15.03.2024.

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Mr. Siddharth Dubey learned counsel for the petitioner would submit that there is no specific information pertaining to the petitioner/assessee emanating from tangible material i.e. the

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statement recorded under Section 132(4) of the Act which suggest(s) that income chargeable to tax has escaped assessment reason being in the statement of Mr. Rakesh Khurana i.e. director of M/s. Radha Krishna Ply & Board Industries, it is nowhere stated that the word " Trf " represents cash received against unaccounted sales made to the petitioner/assessee and the rest of the entries in the handwritten purchase ledger account of the assessee/petitioner maintained by M/s. Radha Krishna Ply & Board Industries have been accounted for even as per the department/respondent(s), as payments have been made via banking channels.

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The Learned Counsel for the petitioner would further submit that no inquiry has been conducted/made by the assessing officer /respondent no.2 in terms of Section 148A(a) comparing the relevant ledger book and computerized books of account to arrive at bonafide satisfaction that income chargeable to tax has escaped assessment ex-consequenti entire proceeding right from the very inception is wholly without jurisdiction as jurisdictional pre-condition i.e. information suggesting that information chargeable to tax has escaped assessment is conspicuously absent. If there is a statement of Mr. Rakesh Khurana, i.e. director of M/s. Radha Krishna Ply & Board Industries recorded under Section 132(4) of the Act to the effect that the word "Trf" represents cash received against unaccounted sales made to the assessee/petitioner, the same has not been furnished to the

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assessee/petitioner. The aforesaid action being de hors Section 148A (b) read with Section 148A(c)³ and principles of natural justice ex consequenti the sequitur order under Section 148A (d) and notice under Section 148 dated 30.03.2024 stands vitiated. It is trite law that valid reopening of assessment should be based/preceded by specific, relevant and reliable information and the same is also the object and scheme of the newly added Section 148A of the Act which is conspicuously absent in the present matter as the statement which exhibits that the entry " Trf" appearing in the purchase ledger account of the petitioner/assessee maintained by M/s. Radha Krishna Ply & Board Industries represent that unaccounted cash sales made to the assessee/petitioner are nowhere to be found, qualifying the aforesaid information furnished by the department to the assessee/petitioner as vague and unreliable. He placed reliance on the judgments passed by the Hon’ble Supreme Court in the matters of Calcutta Discount Co. Ltd. v. Income-tax Officer AIR 1961 SC 372 , Red Chilli International Sales v. Income Tax Officer and Anr 2023 LiveLaw (SC) 16 and Jeans Knit Pvt. Ltd. V. Deputy Commissioner of Income Tax and others (2016) 12 TMI 878 SC.

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Per contra, Mrs. Naushina Afrin Ali & Ajay Kumrani learned counsel for respondents would submit that the object of issuing notice under section 148A of the Act is limited to ascertainment of information which suggests that income has escaped assessment

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and issues such as sufficiency or otherwise of material justifying reopening of assessment or adjudication on the correctness of information are ordinarily not warranted at this stage, in exercise of extraordinary writ jurisdiction. The limited enquiry contemplated at this stage is to ascertain the existence of information which suggests that income has escaped assessment. It is submitted that in the facts of this case, such information does exist on record. It is also argued that petitioner would be at liberty to raise all factual issues/objections at the appropriate stage of the proceedings, and as no prejudice otherwise is caused to him, this Court would not be justified in embarking upon the correctness or otherwise of the information available with the Assessing Officer while taking decision under section 148A(d) of the Act. She has placed reliance on the judgments passed by the Hon’ble Supreme Court as well as Hon’ble Various High Courts in the matters of Raymond Woollen Mills Ltd. vs Income Tax officer and Ors (1999) 236 ITR 34 SC , Larsen & Turbo Ltd. vs. State of Jharkhand, (2017) 13 SCC 780 , Anshul Jain v. Principal Commissioner of Income Tax, (2022) 143 taxmann.com 38 SC & (2022) 143 taxman.com 37 (Punjab and Haryana), Deepak Kumar Yadav v. Principal Commissioner of Income Tax (2023) 151 taxmann.com 376 (Allahabad), Amrit Homes Pvt. Ltd. v. Deputy Commissioner of Income Tax (2023) 154 taxmann.com 289 (Madhya Pradesh), and Barbrik Projects

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Ltd. v. Union of India and others Writ Appeal No. 473/2022 decided on 15.12.2022.

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I have heard learned counsel for the parties and perused the documents, including the notice and order annexed with the petition.

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From the aforesaid submissions made by learned counsel for the parties, this court has to examine whether the writ petition challenging the order passed under Section 148A (d) and notice issued under Section 148 of the Act, 1961, is maintainable or not.

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For better understanding the lis between the parties, it is expedient for this court to extract the relevant provisions of the Income Tax Act, 1961, which are applicable to the facts of the case. Section 148-A of the Act, 1961 has been made effective from 1-4-2021. Section 148A provides for conducting the inquiry, providing an opportunity before the issue of notice under Section 148 of the Act, 1961. Sections 148-A and 149 of the Income Tax Act, 1961 read as under.

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“148A. The Assessing Officer shall, before issuing any notice under section 148, — Advertisement.

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(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;

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(b) provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time,as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this

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behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);

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(c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b); (d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:

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Provided that the provisions of this section shall not apply in a case where —

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(a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or Advertisement

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(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

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(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee; or

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(d) The Assessing Officer has received any information under the scheme notified under section 135A pertaining

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to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.

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149.Time Limit for notice – (1) No notice under section 148 shall be issued for the relevant assessment year—

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(a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b);

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(b) if three years, but not more than ten years, have elapsed from the end of therelevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of— (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more: Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021:

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Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021:

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Provided also that for the purposes of computing the period of limitation as per this section, the time or extended time allowed to the assessee, as per show cause notice issued under clause (b) of section 148A or the period during which the proceeding under section 148A is stayed by an order or injunction of any court, shall be excluded:

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Provided also that where immediately after the exclusion of the period referred to in the immediately preceding proviso, the period of limitation available to the Assessing Officer for passing an order under clause (d) of section 148A is less than seven days, such remaining period shall be extended to seven days and the period of limitation under this subsection shall be deemed to be extended accordingly.

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Explanation: For the purposes of clause (b) of this subsection, “asset” shall include immovable property, being land or building or both, shares and securities, loans and advances, deposits in bank account. Section (2): The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151”.

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From the aforesaid provisions of the Act, 1961, it is quite vivid that the object of issuing notice under Section 148A of the Act is limited to ascertainment of information which suggests that income has escaped assessment and issues such as sufficiency or otherwise of material justifying reopening of assessment or adjudication on the correctness of information are ordinarily not warranted at this stage, in exercise of extraordinary writ jurisdiction.

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The limited enquiry contemplated at this stage is to ascertain the existence of information which suggests that income has escaped assessment. It is submitted that in the facts of these cases, such information does exist on record. It is submitted that the petitioner

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would be at liberty to raise all factual issues/objections at the appropriate stage of the proceedings, and as no prejudice otherwise is caused to him, this Court would not be justified in embarking upon the correctness or otherwise of the information available with the Assessing Officer while taking decision under Section 148A(d) of the Act.

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The order passed by the Assessing Officer under section 148A(d) regarding the existence of information suggesting that income chargeable to tax has escaped assessment would otherwise remain subject to reassessment order passed under section 148. Thus, any observations of the assessing authority while passing order under section 148A(d) with regard to merits of assessment of income would remain subject to the order to be ultimately passed in reassessment proceedings under section 148 and would not be to the prejudice of rights and contentions of the assessee under section 148 as well as departmental remedies in respect thereof.

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In Calcutta Discount Co. Ltd. v Income Tax Officer, Companies District I, Calcutta the only ground for reopening was that the company had failed to disclose the true intent behind the sale of shares, therefore, in the said factual background the Supreme Court held that non-disclosure of true intentions behind sale of shares cannot be said to be an omission on the part of the assessee to disclose the material fact, however, in the case at hand, the impugned notice has been issued on the basis of

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information that the assessee company has bogus credits and bogus purchase of Rice Husk from M/s Bhoomi Mitra Agro total amounting to Rs. 6,05,86,145/- during F.Y. 2016-17 wherein it failed to explain the genuineness of said transaction and the Assessee has received accommodation entries amounting to Rs. 5,00,67,518/- from Kolkata bases shell companies. Thus, in my considered opinion, the decision rendered in Calcutta Discount Co. Ltd. (supra) is distinguishable on the basis of the background facts being different in the matter.

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As regards the decision of the Hon’ble Supreme Court in Red Chilli International Sales (supra) , it is seen that the Division Bench of the High Court of Punjab & Haryana had dismissed a similar petition u/A. 226/227 of the Constitution filed by petitioner/assessee therein by refusing to interfere in the order passed u/S 148A(d) on the ground that since proceedings are yet to be concluded, interference ought to be avoided at premature stage, especially in the absence of any jurisdictional error and in the face of alternative statutory remedy of rectification of error. Pertinently, the decision of the Punjab & Haryana High Court in the case of Red Chilli International Sales (supra) was assailed before the Apex Court, which passed the following order :

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"1. Delay condoned.

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2. We with the petitioner that the impugned judgment rejecting the writ petition on the ground of alternative remedy does not take into consideration several judgments of this Court, on the jurisdiction of High Court,

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as writ petitions have been entertained to be examined whether the jurisdiction preconditions for issue of notice under section 148 of the Income-tax Act, 1961 is satisfied. The provisions of reopening under the Income-tax Act, 1961 have undergone an amendment by the Finance Act, 2021, and consequently the matter would require a deeper and in-depth consideration keeping in view the earlier case law. Accordingly, we set aside the observations made by the High Court in the impugned judgment observing that the writ petition would not be maintainable in view of the alternative remedy, clarify that this issue would be examined in depth by the High Court if and when it arises for consideration. We do deem it open to examine this issue in the present case after having examined the notice under section 148A (b) including the annexure thereto, the reply filed by the petitioner and the order under section 148A(d) of the Income-tax Act, 1961.

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3. Recording the aforesaid, the special leave petition is disposed of. We clarify that the dismissal of the special leave petition would not be construed as a findings or observations on the merits on case.

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4. Pending application(s), if any, shall stand disposed of."

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So far as the judgment of Hon’ble Supreme Court in Red Chilli International Sales (supra) is concerned, the Court directed the High Court to consider the reply filed by the petitioner to the notice under section 148A(b) as well as the order passed under section 148A(d) of the Act of 1961 as the High Court had refused to examine the issue in view of the alternative remedy. This direction by the Hon’ble Supreme Court is on the facts of the case as the issues raised by the petitioner before the High Court were not examined. The Hon’ble Supreme Court did not endorse the view that a writ petition itself would not be maintainable against the order passed under section 148A(d) of the Act, 1961 and

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consequently directed the High Court to examine the merits of the order.

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The Hon’ble Supreme Court in Raymond Woollen Mills Ltd. vs Income Tax officer and Ors (1999) 236 ITR 34 SC has held that “In this case, we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have only to see whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. We are of the view that the court cannot strike down the reopening of the case in the facts of this case. It will be open to the assessee to prove that the assumption of facts made in the notice was erroneous. The assessee may also prove that no new facts came to the knowledge of the Income-tax Officer after completion of the assessment proceeding. We are not expressing any opinion on the merits of the case. The questions of fact and law are left open to be investigated and decided by the assessing authority. The appellant will be entitled to take all the points before the assessing authority. The appeals are dismissed. There will be no order as to costs.

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The term 'information' for the purposes of reopening of assessment has been examined in Larsen & Turbo Ltd. vs. State of Jharkhand, (2017) 13 SCC 780 . Paragraphs nos. 26 and 32 of the report are apposite for the present purposes and are reproduced hereinafter: -

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"26. It is also pertinent to understand the meaning of the word "information" in its true sense. According to Oxford Dictionary, "information" means facts told, heard or discovered about somebody/something. The Law Lexicon describes the term "information" as the act or process of informing, communication or reception of knowledge. The expression "information" means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or having a bearing on the assessment. We agree that a mere change of opinion or having second thought about it by the competent authority on the same set of facts and materials on the record does not constitute "information" for the purposes of the State Act. But the word "information" used in the aforesaid section is of the widest amplitude and should not be construed narrowly. It comprehends not only variety of factors including information from external sources of any kind but also the discovery of new facts or information available in the record of assessment not previously noticed or investigated. Suppose a mistake in the original order of assessment is not discovered by the assessing officer, on further scrutiny, if it came to the notice of another assessor or even by a subordinate or a superior officer, it would be considered as information disclosed to the incumbent officer. If the mistake itself is not extraneous to the record and the informant gathered the information from the record, the immediate source of information to the officer in such circumstances is in one sense extraneous to the record. It will be information in his possession within the meaning of Section 19 of the State Act. In such cases of obvious mistakes apparent on the face of the record of assessment, that record itself can be a source of information, if that information leads to a discovery or belief that there has been an escape of assessment or under-assessment or wrong assessment.

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32. The expression "information" means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or after bearing on the assessment. We are of the clear view that on the basis of information received and if the assessing officer is satisfied that reasonable ground exists to believe, then in that case the power of the assessing authority extends to reopening of assessment, if for any reason, the whole

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or any part of the turnover of the business of the dealer has escaped assessment or has been under-assessed and the assessment in such a case would be valid even if the materials, on the basis of which the earlier assessing authority passed the order and the successor assessing authority proceeded, were same. The question still is as to whether in the present case, the assessing authority was satisfied or not."

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18. In the case of Anshul Jain v. Principal Commissioner of

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Income-tax [2022] 143 taxmann.com 37 (Punj. & Har.), wherein the question arose that:-

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"Whether at this stage of notice under section 148, writ Court should venture into the merits of the controversy when AO is yet to frame assessment/reassessment in discharge of statutory duty casted upon him under section 147 of the Act?"

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In paragraphs 8 and 9 of the judgment, it has held that:-

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8. Thus, the consistent view is that where the proceedings have not even been concluded by the statutory authority, the writ Court should not interfere at such a pre-mature stage. Moreover it is not a case where from bare reading of notice it can be axiomatically held that the authority has clutched upon the jurisdiction not vested in it. The correctness of order under section 148A(d) is being challenged on the factual premise contending that jurisdiction though vested has been wrongly exercised. By now it is well settled that there is vexed distinction between jurisdictional error and error of law/fact within jurisdiction. For rectification of errors statutory remedy has been provided. .

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9. In the light of aforesaid settled proposition of law, we find that there is no reason to warrant interference by this Court in exercise of the jurisdiction under Article 226/227 of the Constitution of India at this intermediate stage when the proceedings initiated are yet to be concluded by a statutory authority. Hence the writ petition stands dismissed.

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Anshul Jain v. Principal Commissioner of Income-

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tax [2022] 143 taxmann.com 38 (SC), SLP dismissed against impugned High court order that where reopening proceeding was at its intermediate stage and not concluded by statutory authority, there was no reason to warrant interference in exercise of jurisdiction under Article 226/227 of Constitution of India.

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The Madhya Pradesh High Court in Amrit Homes (P.) Ltd. v. Deputy Commissioner of Income-tax, [2023] 154 taxmann.com 289 (Madhya Pradesh) has held that Where show-cause notice under section 148A(b) was accompanied by reasons and information which persuaded Assessing Officer to form tentative opinion that income had escaped assessment for relevant year and assessee had also filed a detailed reply to said notice; it was to be held that impugned order under section 148A(d) and consequential notice under section 148 had been issued/passed after following due process of law. Relevant Para 7.1 are as under:-

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7.1 The object behind Section 148A as is evident from the findings in the fountainhead decision of GKN Driveshafts (India) Ltd. (supra), is to enable the assessee to be informed of the reasons and information suggesting that income chargeable to tax has escaped assessment and, therefore, in turn to empower the assessee to prepare and file an effective reply and thereafter the Assessing Officer to pass an order u/S 148A(d), followed by issuance of notice u/S 148 of IT Act.

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8.1 Applying this principle of interpretation of taxing statute, it is obvious from reading of section 148A that it does not expressly provide for supply of any

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material/evidence in support of the show-cause notice u/s 148A(b). Thus this Court has no hesitation to hold that statutory provision u/S 148A does not obligate the Assessing Officer to supply any material/evidence, provided the show-cause notice contains reasons disclosing the mind of the Assessing Officer of nursing the prima facie view suggestive of a case where income chargeable to tax has escaped assessment.

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8.2 This Court would be failing in its duty by not dealing with the aspect that the concept of reasonable opportunity which can reasonably be implied from textual interpretation of section 148A(b) of IT Act (of supply of adverse material) is available to the assessee/petitioner or not. It needs to be tested on the anvil of the trite law that taxing statute is to be strictly construed solely on the plain language employed.

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9.2 The insertion of section 148A w.e.f. 1-4-2021 in the Income-tax Act is to ensure that the power u/s 148 is not exercised as a matter of course or without application of mind. Thus, the inquiry contemplated by section 148A(b) is not a detailed or full-scale one, but is merely meant to offer reasonable opportunity of being heard to the assessee to avoid casual reopening assessment u/s 148.

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9.3 It may not be out of place to mention that the showcause notice u/s 148A(b) ought to be pregnant with concise and precise information revealing the information about foundational material which persuaded the Assessing Officer to come to a tentative finding that certain income has escaped assessment.

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Pertinently, the question of going into the veracity and genuineness of material/evidence forming the opinion of the Assessing Officer suggesting that income of petitioner/assessee has escaped assessment ought not to be gone into while exercising writ jurisdiction under Article 226 or supervisory jurisdiction under Article 227 of the Constitution. Thus, the ground

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of reliability and tenability of the evidence/material is not considered herein.

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Consequently, the present petition deserves to be and is hereby dismissed at the admission stage itself with liberty to petitioner to avail the statutory alternative remedy under the Income-tax Act in accordance with law.

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The Allahabad High Court in Deepak Kumar Yadav v. Principal Commissioner of Income-tax, [2023] 151 taxmann.com 376 (Allahabad) has held that maintainability of the writ petition against the order passed under section 148A(d) is distinct from the scope of adjudication available qua the order passed under section 148A(d) of the Act. The limited scope available under Article 226 of the Constitution of India to adjudicate an order passed under section 148A(d) of the Act, 1961, would be confined to the existence of the information only, in view of the scheme of the Act of 1961. A contrary construction cannot be culled out from the judgment of the Hon’ble Supreme Court in Red Chilli International Sales (supra). Relevant Para 9, 11, 12 is as under:-

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Reading of Section 148A reveals that the assessing authority shall, before issuing any notice under section 148, conduct any enquiry, if required, with the prior approval of the specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment. On receipt of such information the assessing officer is required to provide an opportunity of being heard to the assessee, in the manner specified, as to why a notice under section 148 of the Act

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should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted as per clause (a), if any. The assessing authority is then required to consider the reply of the assessee, if any, in response to the show cause notice referred to in clause (b). It is thereafter that the assessing authority has to decide, on the basis of material available on record, including the reply of the assessee, whether or not it is a fit case to issue a notice under section 148 by passing an order in the manner specified. The proviso exempts the category of cases which are not covered by Section 148A. The proviso to section 148A has no applicability in the facts of the present case and, therefore, it does not require any examination.

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The scheme for reassessment of escaped income introduced vide

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Finance Act, 2021 provides for an opportunity to the assessee before issuance of notice under section 148 of the Act of 1961. After such notice to the assessee and consideration of reply of assessee in response to the notice the assessing authority has to decide on the basis of material available on record by passing an order under section 148A(d) whether a notice under section 148 is fit to be issued in the case. The consideration at the stage of passing order under section 148A(d) is thus limited to the ascertainment of information with the Assessing Officer that the income of the assessee has escaped assessment to tax. Final determination on the question whether the income of the assessee has actually escaped assessment is then to be made after notice under section 148, by passing an order of assessment or reassessment under section 147, subject to the provisions of sections 148 to 153 of the Act of 1961.

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The Act of 1961 does not contemplate any detailed adjudication on the merits of information available with the Assessing Officer at the stage of passing the order under section 148A(d) of the Act of 1961. In our considered view, there is a specific purpose for not introducing any further enquiry or adjudication in the statute, on the correctness or otherwise of the information, at this stage. The reason for it is obvious. Under the scheme of the Act, a detailed procedure has been provided under section 148 for issuance of notice, whereafter the assessing authority has to determine, in the manner specified, whether income has escaped assessment, and the defence of assessee, on all permissible grounds, remains open to be pressed at such stage. The ultimate determination made by the assessing authority under section 147 for reassessment is otherwise subject to appeal under section 246-A of the Act. Merits of the information referable to Section 148A thus remain subject to the reassessment proceedings initiated vide notice under Section 148 of the Act. It is for this reason that issues which require determination at the stage of reassessment proceedings and in respect of which departmental remedy is otherwise available are not required to be determined at the stage of decision by the assessing authority under section 149A(d). The scope of decision under section 148A(d) is limited to the existence or otherwise of information which suggests that income chargeable to tax has escaped assessment.

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Maintainability of the writ petition against the order passed under section 148A(d) is distinct from the scope of adjudication available qua the order passed under section 148A(d) of the Act. The limited scope available under Article 226 of the Constitution of India to adjudicate an order passed under section 148A(d) of the Act, 1961, would be confined to the existence of the information only, in view of the scheme of the Act of 1961. A contrary construction cannot be culled out from the judgment of the Supreme Court of India in Red Chilli International Sales (supra).

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The show-cause notice thus should be reasoned enough to enable the assessee to know the mind of the Assessing Officer as regards the factum of certain income having escaped assessment and his intention to re-open assessment of such income. This is possible only when the show-cause notice contains enough information to disclose the intention of the Assessing Officer so as to afford a reasonable opportunity to the assessee to respond. The contents of the show-cause notice, thus, should be precise and concise, satisfying the concept of reasonable opportunity.

¶114

The grounds which have been taken by the petitioner in the writ petition is his defence that cannot be examined at the stage of issuance of notice under section 148 of the Act, 1961 as the Assessing Authority before issuance of notice under Section 148 of the Act, 1961 has to rely upon credible information which in the impugned order under Section 148A (d) of the Act, 1961 has already been furnished and thereafter, considering the material it has recorded a finding that it is a fit case where notice under Section 148 of the Act, 1961 can be issued. Learned counsel for the petitioner is unable to point out that the findings which have been recorded by the Assessing Authority are contrary to the material on record, and the Assessing Authority has not applied its mind, or the Assessing Authority has not considered the reply filed by the petitioner. Therefore, the writ petition, at this juncture, is not maintainable and deserves to be dismissed.

¶115

¶116

In the light of the aforesaid settled proposition of law, we find that there is no reason to warrant interference by this Court in the exercise of the jurisdiction under Article 226/227 of the Constitution of India at this intermediate stage when the proceedings initiated are yet to be concluded by a statutory authority. Hence, the writ petition stands dismissed.

¶117

It is made clear that this court has not examined the contentions of the petitioner on merit, only taken note of the facts for examining the fact whether the writ petition filed under Article 226 of the Constitution of India is maintainable or not. It is for the Assessing Authority, while conducting the proceeding under Section 148 of the Act, 1961, to examine and decide the case as per the material available on record, without being influenced by any of the observations made by this court in the foregoing paragraphs.

¶118

Sd/-

¶119

(Ravindra Kumar Agrawal)

¶120

Judge

¶121

Alok

¶122

Digitally
signed by
ALOK
ALOK SHARMA
SHARMA Date:
2025.04.23
19:09:53
+0530

Shanti Timbers Traders v. Union of India

Case brief

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Shanti Timbers Traders v. Union of India

Case brief

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