2014 (12) TMI 1264 - HC - Income Tax

Reopening of assessment - Held that - Allegation levelled against the writ petitioner in the reasons for another assessment year is that they have allegedly taken service from non-existing service providers. In that process they have transferred their unaccounted money. More particulars are required. If at all there is a network through which the assessee is operating the main circuits have to be identified. In those circumstances the communications dated 7th March 2014 being P-8 collectively are set aside. The respondents are directed to issue fresh communications containing details to substantiate the allegations of the department by 27th February 2015. If they are not issued the Sections 147 148 proceedings in respect of the above assessment years will automatically stand dropped. If the fresh reasons are supplied the writ petitioner will have the right to reply to them within four weeks after communication of the reasons. In that event the Sections 147 148 proceedings in respect of the above assessment years will remain suspended till the reply is received and processed by the Income Tax department by a decision. Affidavits were not invited. Hence the allegations contained in the application are deemed not to be admitted.

Summary

Issues:
Prima facie case made out in writ application for five assessment years; Lack of necessary details in communications from Income Tax department for issuance of Section 148 notices; Vagueness of reasons provided by department; Insufficient particulars in allegations against the assessee; Setting aside of communications dated 7th March, 2014; Direction to issue fresh communications with detailed substantiation by a specified date; Suspension of Sections 147, 148 proceedings pending receipt and processing of reply by Income Tax department; Disposal of the writ application.

Analysis:
The judgment by Justice I. P. Mukerji addresses the issue of a prima facie case made out in the writ application concerning five assessment years from 2007-08 to 2011-12. It highlights a crucial point regarding the lack of necessary details in the communications from the Income Tax department dated 7th March, 2014, which were stated to be the reasons requested by the writ petitioner for the issuance of Section 148 notices. The judgment emphasizes that these communications do not contain the essential details required for the assessee to understand and respond to the allegations effectively.

Furthermore, the judgment references the decision of the Supreme Court in GKN Drive Shaft, emphasizing the assessee's right to contest the reasons provided by the department. It points out that if the reasons advanced are vague, the assessee is left unaware of the charges against them, making it difficult to respond adequately. The judgment specifically highlights examples from the reasons supplied by the department, such as allegations related to share capital received by the assessee company and transactions with alleged non-existing service providers, emphasizing the need for more specific particulars to substantiate these claims.

In response to the insufficient details and vagueness of the reasons provided, the judgment sets aside the communications dated 7th March, 2014, collectively referred to as 'P-8'. The court directs the respondents to issue fresh communications containing detailed substantiation of the allegations by a specified date, failing which the Sections 147, 148 proceedings for the assessment years in question will automatically stand dropped.

Moreover, the judgment outlines the process to be followed if fresh reasons are supplied, allowing the writ petitioner the right to reply within a specified timeframe. It states that the Sections 147, 148 proceedings will remain suspended until the reply is received and processed by the Income Tax department, emphasizing the importance of a fair and transparent process in dealing with the allegations against the assessee.

Finally, the judgment concludes by disposing of the writ application, indicating that affidavits were not invited and hence the allegations contained in the application are deemed not to be admitted. The comprehensive analysis of the judgment highlights the importance of providing detailed and specific reasons in legal proceedings to ensure a fair and transparent process for all parties involved.