Discrepancies in Interest Income Data on E-Portal: Bombay HC quashes Notice u/s 148 of Income Tax Act [Read Order]

The Bombay High Court quashed a notice issued under Section 148 of the Income Tax Act, 1961, after discovering discrepancies in the interest income data provided by the electronic system.

The petitioner, Benaifer Vispi Patel, disclosed an interest income of Rs. 8,72,800/- from Canara Bank in her tax return. However, she received a notice under Section 148 for allegedly escaping assessment based on an inflated interest income figure of Rs. 26,41,235. This error was later corrected to reflect the actual amount.

Dharen V. Gandhi, representing the petitioner, submitted that this is a case where the respondents have proceeded purely on an erroneous basis merely on information derived from the e-portal and under the mechanism operating under the provisions of Section 135A, and as incorporated under Section 148A of the Act, in issuance of the impugned notice, so as to form a prima facie opinion that income has escaped assessment.

It was further submitted that when the information received from the portal in the electronic form itself is defective, as in the present case, such information cannot form the basis for issuance of a notice under Section 148 of the Act by dispensing with the requirement of Section 148A, which requires a notice and an order to be passed, under sub-sections (b) & (d) of the Section.

Akhileshwar Sharma, representing the respondents, submitted that the rectified interest income data now aligned with the petitioner's disclosure and suggested disposing of the petition based on the revised affidavit. The court reviewed the reply affidavit filed by the respondents, confirming the accuracy of the petitioner's disclosed interest income.

The bench of Justices G.S Kulkarni and Somasekhar Sundaresan noted that Section 135A, Section 148, and Section 148A of the Income Tax Act establish a framework for faceless collection and assessment of information. It stressed that while faceless mechanisms enhance efficiency and transparency, they are not immune to errors.

The bench underscored the responsibility of the assessing officer to verify electronic information against taxpayer-provided data before issuing notices under Section 148. It criticised the reliance on defective data without thorough scrutiny, leading to the petitioner's unwarranted ordeal.

"The Assessing Officer should have considered the data in the possession of the income tax department and verified the same with the material provided by the Petitioner." The court stated. It was also emphasised that such verification is necessary to prevent "arbitrary exercise of powers" and protect taxpayers' rights under Article 14 and Article 300A of the Constitution of India.

The court concluded that the notice issued under Section 148 was arbitrary and resulted from non-application of mind by the Assessing Officer. Consequently, it quashed the notice, providing relief to the petitioner.

To Read the full text of the Order CLICK HERE

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