2023 (5) TMI 707 - HC - Income Tax

Reopening of assessment - notice to petitioner u/s 148A(b) accompanying the information with the assessing officer to suggest that income chargeable to tax has escaped assessment - HELD THAT - Assessing authority has received information from DDIT (investigation) Unit III Nagpur from DGGI and GST authorities as well as from CBDT that the sellers of the assessee were availing fraudulent ITC on the basis of investigation made by the concerned agencies. Such information would be information referable to clause (i) of Explanation 1 to second proviso to section 148 - We have already observed that there is no challenge to the notice by the assessee on the ground that information disclosed vide notice u/s 148A(b) is not covered by the information specified in Explanation 1 to the second proviso to section 148. 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) - 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 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 2023 (1) TMI 674 - SC ORDER In Anshul Jain 2022 (10) TMI 3 - SC ORDER the Supreme Court did examine the scope of proceedings under section 148A vis-a-vis reassessment proceedings u/s 148 of the Act to observe that by the very nature of proceedings the examination would remain more exhaustive at the stage of reassessment proceedings with elaborate remedies available under the statute to the assessee. The order passed by the AO u/s 148A(d) regarding 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 u/s 148A(d) with regard to merits of assessment of income would remain subject to the order to be ultimately passed in reassessment proceedings u/s 148 and would not be to the prejudice of rights and contentions of the assessee u/s 148 as well as departmental remedies in respect thereof. We do not find any merit in the challenge laid to the order of assessing authority u/s 148A(d) as well as the notice issued u/s 148 - WP dismissed.

Summary

Issues Involved:
1. Validity of notice issued under Section 148A(b) of the Income Tax Act, 1961.
2. Consideration of petitioner's objections by the Assessing Officer.
3. Scope of judicial review under Article 226 of the Constitution of India on the order passed under Section 148A(d).

Summary:

Validity of Notice under Section 148A(b):
The petitioner, engaged in the business of trading Arecanut, received a notice under Section 148A(b) suggesting that income chargeable to tax had escaped assessment. The notice was based on information from DGGI and GST authorities indicating that the petitioner had availed fake invoices from M/s Kuhoje K Achumi and M/s Om Traders, entities found to be non-existent at their declared business locations. The petitioner was reported to have made fictitious purchases amounting to Rs. 1,79,68,750/-.

Consideration of Petitioner's Objections:
The petitioner filed detailed objections denying the allegations and requested cross-examination of the suppliers. However, the jurisdictional authority rejected these objections, citing the existence of information suggesting fictitious transactions. Consequently, the purchases were treated as fictitious, and the amount was considered as having escaped assessment for the year 2019-20. The petitioner's request for cross-examination was declined due to the time-barring nature of the matter.

Scope of Judicial Review:
The court emphasized that the scheme for reassessment under the amended sections 147 and 148 of the Income Tax Act, 1961, requires the Assessing Officer to ascertain the existence of information suggesting that income has escaped assessment. The court clarified that the merits of the information need not be adjudicated at this stage. The final determination on whether income has actually escaped assessment is to be made during the reassessment proceedings under Section 148, which is subject to appeal.

The court referred to the Supreme Court's judgment in Red Chilli International Sales vs. Income-tax Officer, which highlighted that the High Court should examine whether the jurisdictional preconditions for issuing a notice under Section 148 are satisfied. The court also cited the judgment in Anshul Jain vs. Pr. CIT, where the Supreme Court held that grievances on merits should be agitated before the Assessing Officer in reassessment proceedings.

Conclusion:
The court concluded that the challenge to the order under Section 148A(d) and the notice under Section 148 lacked merit. The scope of judicial review under Article 226 is limited to the existence of information suggesting that income has escaped assessment. The writ petition was dismissed, affirming the validity of the proceedings initiated by the Assessing Officer.