The Allahabad High Court has dismissed the petition challenging the order dated 25.05.2023 passed by the Assessing Officer, Income Tax Department under Section 147 read with Section 144-B of the Income Tax Act, 1961 whereby a sum of Rs 1,20,59,813/- has been assessed as annual income for the Assessment Year 2015-16 and a demand of Rs 73,12,082/- towards tax has been raised against the petitioner.
The Division Bench of Chief Justice Pritinker Diwaker and Justice Ashutosh Srivastava passed this order while hearing a petition filed by Vivek Saran Agarwal.
A challenge to the consequential notice under Section 148 of the Income Tax Act, 1961 dated 26.07.2022 has also been laid.
It is the case of the petitioner that he electronically filed his return for the Assessment Year 2015-16 on 01.12.2015 declaring income of Rs 12,69,380/- .
The case of the petitioner was taken up for scrutiny under Section 143(3) of the Act and in the course of the assessment proceedings notices under Section 143(2) and 142(1) of the Act were issued.
The petitioners filed his replies to the notices and after due examination of the same the income was fully assessed and accepted at the returned income vide assessment order dated 18.01.2017.
It is further contended that the Income Tax Act, 1961 was amended vide the Finance Act, 2021 w.e.f 01.04.2021 and the provisions of reassessment i.e Sections 147, 148, 149, 151, 151A etc. were amended and Section 148A was inserted as a pre-requisite for the notice of the Act (unamended).
Meanwhile, such notices under Section 148 of the Act (Unamended) were put to challenge before various High Courts and such notices were quashed.
The petitioner in response to the notice under Section 148 filed the return of income on 20.08.2022 declaring total income of Rs 12,69,380/- Thereafter, the Respondent No 4 issued the intimation to the assessee for completion of the assessment under Section 144-B and Respondent No 4 has issued various notices under Section 142(1) of the Act lastly on 10.04.2023 which were duly replied by the petitioner annexing all the documents i.e copy of assessment order under Section 143(1) contract note of purchase and sale.
The Respondent No 4 in continuation of the proceedings issued show cause notice dated 07.05.2023 to show cause as to why proposed variation should not be made which notice was duly replied by the petitioner vide reply dated 12.05.2023. The Respondent No 4 thereafter has passed the order dated 25.05.2023 under Section 147 read with Section 144-B of the Income Tax Act, 1961. The notice of demand has been issued accordingly.
On the strength of the above facts, counsel for the petitioner has argued that the case of the petitioner is squarely covered by the first proviso to Section 147 of the Act as it stood prior to the amendment by the Finance Act, 2021 which provides that where assessment has already been completed under Section 143(3) of the Act, no reassessment proceedings can be initiated after the expiry of four years from the relevant Assessment Year 2015-16 i.e 31.03.2020 unless the income has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. In the absence of any such allegation against the petitioner the reassessment proceedings are wholly unwarranted.
Gaurav Mahajan and N.C Gupta, counsels for the Revenue in opposition to the petition submitted that the objections filed by the petitioner/assessee have been duly considered and the assessing authority has found that it is a fit case to issue notice under Section 148 of the Act.
They further submitted that the consideration at the stage of passing order under Section 148A(d) is limited to ascertainment of information with the assessing officer that income of assessee has escaped assessment to tax. Final determination on the question whether income of 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 Section 148 to 153 of the Act.
It is also argued that the petitioner is at liberty to raise all factual issues/objections at the appropriate stage of the proceedings and no prejudice is being caused to the petitioner.
It is contended that 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.
The Court observed that,
The Assessing Officer has proceeded to pass an order on 25.05.2023 under Section 148A(d) of the Income Tax Act, 1961 rejecting the objection of the petitioner to the show cause notice under Section 148A(b) of the Income Tax Act, 1961 on the ground that information exists to suggest that an addition of Rs 1,05,78,856/- and Rs 2,11,577/- should not be made as per the provisions of Section 69A and 69C respectively. The reply of the assessee has been considered but the same is not found to be satisfactory. The assessee has not offered his unaccounted unexplained income for taxation purposes in his return of income. It is precisely evident that this office has certain information which strongly suggests that the income chargeable to tax has escaped assessment for Assessment Year 2015-16. A consequential notice has also been issued to the petitioner under Section 148 of the Act.
The Income Tax Act, 1961 does not contemplate any detailed adjudication on the merits of information available with the Assessing Officer at the stage of passing 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 remains 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.
“Thus, in our opinion, the impugned order under Section 148A(d) of the Act and notice under Section 148 would not warrant any interference under Article 226 of the constitution of India as challenge to such order would be available to an assessee while challenging the order passed in reassessment proceedings consequent to the notice issued under Section 148 of the Act.
In view of the above, we find no merit in the challenge laid to the order dated 25.05.2023 passed under Section 148A(d) of the Income Tax Act, 1961 as well as to the notice dated 26.07.2022 under Section 148 of the Act”, the Court further observed while dismissing the petition.