In a significant case, the Allahabad High Court has held that enquiry under section 148A(d) of the Income Tax Act, 1961 applies only to the extent of (un) availability of information showing income escapement.
Ashish Bansal appeared for the petitioner and Gaurav Mahajan appeared for the respondent.
Deepak Kumar Yadav, the Petitioner is an individual who is engaged in the business of trading of Arecanut (Supari), Chopped Betal Nut and Sweet Betal Nut in the name of his proprietary concern namely “S.K.L. Enterprises”.
It was alleged that his Books of Account and other records are subject to audit under Section 44AB of the Income Tax Act, 1961. He further claims to be filing his return year after year and has been assessed to tax accordingly. For the Assessment Year 2019-20, the petitioner filed his return under Section 139(1) of the Act on 26.08.2019 disclosing total income of Rs. 6,81,630/-. The turnover during the year from his proprietary concern aggregated to Rs. 5,87,26,116/- and aggregate purchases are of Rs. 5,81,61,860/-.
He further asserts that he has been assessed under Section 143(1) of the Act on the basis of return submitted by him on 26.08.2019 and no notice has been issued to him under Section 143(2) of the Act.
The respondent no. 2 issued a notice to the petitioner dated 16.03.2023, under Section 148A(b) of the Act, 1961 accompanying the information with the assessing officer to suggest that income chargeable to tax has escaped assessment.
Section 148A reveals that the assessing authority shall, before issuing any notice under section 148 conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment.
On receipt of such information the assessing officer is required to provide an opportunity of being heard to the assessee, in the manner specified, as to why a notice under Section 148 of the Act should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted as per clause (a), if any.
It was evident that the assessing authority on receipt of information which suggests that the income chargeable to tax has escaped assessment may conduct any enquiry in the matter, if required, and then provide an opportunity of being heard to the assessee by serving upon him a notice under clause (b). On receipt of the reply of the assessee to the notice referred to in clause (b) the assessing officer based on material available on record including the reply of the assessee decides whether or not it is a fit case to issue a notice under Section 148.
In Red Chilli International Sales, the Apex Court directed the High Court to consider the reply filed by the petitioner to the notice under section 148A(b) as well as the order passed under section 148A(d) of the Act of 1961 as the High Court had refused to examine the issue in view of the alternative remedy.
The order passed by the Assessing Officer under section 148A(d) of the Act regarding the existence of information suggesting that income chargeable to tax has escaped assessment would otherwise remain subject to a reassessment order passed under section 148 of the Act.
A division bench comprising Justice Ashwani Kumar Mishra and Justice Shiv Shanker Prasad viewed that “any observations of the assessing authority while passing an order under section 148A(d) about merits of assessment of income would remain subject to the order to be ultimately passed in reassessment proceedings under section 148 and would not be to the prejudice of rights and contentions of the assessee under section 148 as well as departmental remedies in respect thereof.”
The petition was dismissed
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