TMI Blog2022 (8) TMI 1140X X X X Extracts X X X X X X X X Extracts X X X X ..... re. If that is so, then it goes without saying that what was intended by the assessing officer is to conduct an enquiry after receiving information from the assessee and the notice is deemed to be a notice under Section 148A (a) of the Act. Thus, there is gross procedural error from the very inception of the proceedings rendering the same as bad in law. In the result, the appeal is allowed, the order passed in the writ petition is set aside. Consequently, the writ petition is allowed to the extent indicated:- (i) The order under Clause (d) of Section 148A of the Act dated 12.04.2022 is set aside and the matter is remanded to the assessing officer. (ii) For the reasons mentioned above, the notices dated 21.03.2022 and 31.03.2022 though stated to have been issued under Clause (b) of Section 148A of the Act, they are in fact, notices under Clause (a) of Section 148A of the Act and be treated as such, and accordingly direction is issued to the assessing officer to conduct an enquiry after receipt of the explanation from the assessee. (iii) The assessing officer, before conducting enquiry as directed in Clause (ii) above, is directed to furnish full information as sought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arka, learned Senior Advocate appearing for the appellant submitted that the notices dated 21.03.2022 and 30.03.2022 are not notices issued under Section 148A (b) of the Act, but were notices of initial enquiry under Section 148A (a) of the Act. Further, the notices did not disclose any reasons / materials to suggest, in its Annexure A or otherwise that any income of the assessee had escaped assessment within the meaning and purposes of Section 148 Explanation 1(i) read with Section 148A (b) of the Act. It is further submitted that in the main page of the notices which is a pre-printed form, it has been falsely alleged that the details of the information and enquiry, if conducted are enclosed with the notice in annexure. Further, it is submitted that Annexure A appended to the notices merely required the assessee to furnish all bank accounts maintained during the period under consideration and details of alleged funds received with documentary evidence and therefore, it is in the nature of general initial enquiry and not notice under Section 148A (b) of the Act. Further, it is submitted that the information/ material/ facts mentioned in the order dated 12.04.2022 were never discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w the said procedure. In support of his contention that the order passed by the authority should be a speaking order after considering objections filed by the assessee, reliance was placed on the decision in the case of Roquette Riddhi Siddhi (P.) Ltd. Versus Deputy Commission of Income Tax Circle 3(1)(2), Ahmedabad (2021) 130 taxmann.com 237 (Gujarat). Reliance was placed on the celebrated decision in the case of Calcutta Discount Co. Ltd. Versus Income Tax Officer (1961) 41 ITR 191 (SC) for the proposition that jurisdictional fact is a condition precedent before proceedings are initiated for re-assessment. For the proposition that it is not sufficient for the Assessing Officer to merely state that he has reasons to believe that income escaped assessment but he has to set out the material based on which he arrived at such belief, reliance was placed on the decision of the Hon ble Supreme Court in Income Tax Officer Versus Madnani Engineering Works Ltd. (1979) 118 ITR 1 (SC). With regard to the need for recording satisfaction by the Assessing Officer, reliance was placed on the decision in Chhugamal Rajpal Versus S.P. Chaliha Ors. (1971) 79 ITR 603. For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for the appellant and Ms. Smita Das De, learned Advocate for the respondents. 5. The assessee filed return of income for the assessment under consideration, A.Y. 2018-19 on 31st October, 2018. An intimation under Section 143(1) of the Act was issued on 31.08.2019. Thereafter, notice under Section 143(2) of the Act was issued on 22nd September, 2019. Stating that there are certain issues which need further clarification for which the return of income filed by the assessee has been selected for scrutiny and such issues initially are regarding method of accounting and ICDS compliance and adjustment. The assessee was directed to submit its response with supporting documents, if any, to the Assessing Officer on or before 07.10.2019. The assessee submitted their response on 6th January, 2020 stating that they are following mercantile system of accounting and have stated closing stock of shares as on 31st March, 2018. That they have calculated market price of listed shares as on 31st March, 2018 and in order to comply with the provisions of ICDS, they have shown decrease in profit of Rs. 24,09,54,283.70/-. It was further stated that due to ICDS compliance and adjustment in their com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y submitted by the assessee was not accepted by the Assessing Officer and by order dated 07.06.2021 the assessment was completed under Section 143(3) read with Section 144B of the Act, by making a disallowance under Section 14A read with Rule 8D of the Rules. Aggrieved by such order, the assessee preferred appeal before the Commissioner of Income Tax Appeals, National Faceless Appeal Centre, Delhi. The grounds raised before the Appellate Authority are as follows: For that the Ld. A.O. erred in not providing reasonable and sufficient opportunity to the appellant to make reply/submission against the draft assessment order. For that the Ld. A.O. erred in making disallowance of Rs. 34,13,888/- u/s 14A read with Rule 8D on alleged grounds. For that there being exempt income amounting Rs. 1,58,157/- claimed by the appellant, the disallowance u/s 14A of the Act shall be restricted to Rs. 1,58,157/- For that the disallowance of Rs. 34,13,888/- is otherwise high and/or excessive. 7. At that juncture, the Assessing Officer issued notice dated 21.03.2022 under Clause (b) of Section 148 of the Act directing the assessee to show cause as to why, in view of the detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xplain as to why Notice u/s 148 would not be issued in your case to reopen your assessment for the relevant year on the basis of adverse information received against you. This communication has been made on receiving prior approval from the Competent Authority. Your compliance and cooperation in this regard will be highly appreciated. 8. The assessee submitted their response dated 28.03.2022 by e-proceedings. The assessee also submitted his written reply dated 30.03.2022 to the notice issued under Clause (b) of Section 148 (A) of the Act. After mentioning about the transaction in the shares done by them and the amounts received the assessee requested for the following documents/information:- Please provide us the verbatim copy of information suggesting escapement of income available with you on which notice u/s 148A of the Act had been issued in terms of explanation 1 to section 148. Please provide us the copies of adverse material and adverse statements, if any based on which you say in notice that there is information with you suggesting escapement of income. Please provide us with the copy of material gathered by you on the basis of enquiry, if any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of adverse materials and adverse statements, if any based on which notice was issued. Further the assessee requested for copy of the materials gathered on the basis of enquiry, if any conducted under Clause (a) of Section 148A. The assessee requested an opportunity to cross examine the persons who might have given adverse deposition in connection with the subject matter upon which notice under Section 148A has been issued. The assessee also requested for the copy of the approval of the specified authority which had been given to the assessing officer before issuance of the notice to show cause under Section 148A of the Act. This request has been consistently reiterated by the assessee. It has to be seen as to what the assessing officer has to do in such circumstances. To our mind, there are two options, the first of which is to furnish the information and documents as sought for by the assessee in full. The second option is to intimate the assessee the reason for not being able to furnish the documents or information as sought for by the assessee. The assessing officer did neither of the above two but proceeded to pass the order under Clause (d) of Section 148A of the Act. Thus, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been called for from the assessee and they were requested to submit their explanation with clarification and necessary information. If such is the tenor of the notice, it pre-supposes that the assessing officer was desirous of conducting an enquiry after receiving clarifications and information on the issues mentioned in Clauses (a) to (f) as contained in the annexure. Therefore, we agree with the submissions of the learned senior advocate for the assessee that the notice dated 21.03.2022 and the subsequent notice dated 30.03.2022 though purported to have been issued under Clause (b) of Section 148A are in fact, notices under Section (a) of Section 148A. Pursuant to information furnished by the assessee on the various queries made, the assessing officer would be at liberty to enquire into the same and then take a decision as to whether materials are available to issue a notice under Clause (b) of Section 148 of the Act. There appears to have been some confusion in the matter and the authority proceeded further in the matter construing the notice to be a notice under Clause (b) of Section 148A of the Act. Thus, a fundamental error has occurred thereby vitiating the entire proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecord including the reply of the assessee, whether or not it is a fit case to issue notice under Section 148 of the Act. At this juncture, it would be relevant to take note of few paragraphs of the decision in Ashish Agarwal: However, by way of Section 148A, the procedure has now been streamlined and simplified. It provides that before issuing any notice under Section 148, the assessing officer shall (i) conduct any enquiry, if required, with the approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment; (ii) provide an opportunity of being heard to the assessee, with the prior approval of specified authority; (iii) consider the reply of the assessee furnished, if any, in respect to the show-cause notice referred to in clause (b); and (iv) decide, on the basis of material available on record including reply of the assessee, as to whether or not it is a fit case to issue a notice under Section 148 of the IT Act and (v) the AO is required to pass a specified order within the time stipulated. Therefore, all safeguards are provided before notice under Section 148 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2022 dated 21.06.2022. 15. Mr. Muraka had also stressed the point with regard to the approval which is stated to have been granted by the competent authority. In fact, the assessee has sought for a copy of the order granting such approval, in the opinion of the assessee there is no such prior approval. 16. In Chhugamal Rajpal, the Hon ble Supreme Court while setting aside the re-assessment proceedings also took note of the importance of the permission which was required to be granted by the Commissioner and after noting the facts therein, it was held that the Commissioner has mechanically accorded permission and he did not himself record that he was satisfied that it was the fit case for the issue of notice under the erstwhile Section 148 of the Act. Though the said decision arose under the pre-amended Section 148, yet the decision can be referred to stress the importance of the approval to be granted by the competent authority. To the same effect, the decision in Johri Lal (HUF), wherein the Hon ble Supreme Court held that the Commissioner or the Board of Revenue while granting sanction for proceeding under Section 34 (1) (a) of the Indian Income Tax Act, 1922 will have to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the annexure, it is clearly seen that the annexure does not contain information but it is a questionnaire. If that is so, then it goes without saying that what was intended by the assessing officer is to conduct an enquiry after receiving information from the assessee and the notice is deemed to be a notice under Section 148A (a) of the Act. 21. Thus, there is gross procedural error from the very inception of the proceedings rendering the same as bad in law. 22. In the result, the appeal is allowed, the order passed in the writ petition is set aside. Consequently, the writ petition is allowed to the extent indicated:- (i) The order under Clause (d) of Section 148A of the Act dated 12.04.2022 is set aside and the matter is remanded to the assessing officer. (ii) For the reasons mentioned above, the notices dated 21.03.2022 and 31.03.2022 though stated to have been issued under Clause (b) of Section 148A of the Act, they are in fact, notices under Clause (a) of Section 148A of the Act and be treated as such, and accordingly direction is issued to the assessing officer to conduct an enquiry after receipt of the explanation from the assessee. (iii) The assessing off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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