2022 (5) TMI 892 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - as argued case re-opened on the basis of borrowed satisfaction by simply relying upon the information flagged by the Risk Management Strategy of the Income Tax Department - also detailed replies of the Petitioner-Company were not taken into consideration by Respondent No.1 and therefore the Order under Section 148A(d) and the consequential Notice under Section 148 of the Act should be set aside - HELD THAT - On the last date of hearing respondent-revenue had sought time to obtain instructions. Today he prays for further time to obtain instructions. However this Court is of the view that the respondent-revenue has had adequate time to obtain instructions. Consequently this Court has no other option but to believe the averments in the writ petition. Believing the averments in the writ petition to be true the impugned order and notice under Section 148 of the Act are set aside on the ground that the Assessing Officer has not taken into consideration the replies along with the documents/evidences filed by the petitioner. Accordingly the Assessing Officer is directed to pass a fresh reasoned order under Section 148A(d) of the Act after taking into account the submissions/contentions advanced by the petitioner in its replies as well as documents/evidences filed along with the said replies.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act for Assessment Year 2018-19 based on borrowed satisfaction and lack of independent inquiry by Respondent No.1. Allegation of not considering detailed replies of the Petitioner-Company leading to the order under Section 148A(d) of the Act and consequential notice under Section 148 being set aside.

Analysis:
The petitioner filed a writ petition challenging the notice dated 31st March, 2022 issued by Respondent No.1 under Section 148 of the Income Tax Act for the Assessment Year 2018-19. The petitioner's counsel argued that the case was reopened based on borrowed satisfaction without an independent inquiry by Respondent No.1. It was contended that the information relied upon was from the Risk Management Strategy of the Income Tax Department, and no effort was made to verify if there was any income escapement. Additionally, it was highlighted that the detailed replies of the Petitioner-Company dated 19th March, 2022 and 24th March, 2022 were not considered by Respondent No.1 when issuing the order under Section 148A(d) of the Act and the consequential notice under Section 148.

During the proceedings, the respondent's counsel sought additional time to obtain instructions, but the Court noted that sufficient time had already been given. Consequently, the Court decided to believe the averments in the writ petition. Based on the belief that the petitioner's contentions were true, the Court set aside the impugned order and notice under Section 148 of the Act. The reason cited was that the Assessing Officer failed to consider the replies, documents, and evidences submitted by the petitioner.

As a result of the decision, the Assessing Officer was directed to issue a fresh reasoned order under Section 148A(d) of the Act, taking into account the submissions and evidence provided by the petitioner in their replies. The writ petition and pending applications were disposed of with this direction. Importantly, the Court clarified that its decision did not touch upon the merits of the controversy, leaving the rights and contentions of all parties open for future proceedings.