Income Tax Reassessment can be Exercise only on Fit Case: Allahabad HC sets aside Order Passed u/s 148A [Read Order]

The Allahabad High Court while allowing the order passed under Section 148A of the Income Tax Act, 1961, it was held that reassessment under the Income Tax Act can be exercised only on fit case. The Court held that the Assessing Authority need not go into the correctness of the material but only record its satisfaction as to the relevancy of the material for assuming jurisdiction for initiating reassessment proceedings under Section 148 of the Act.

Ravindra Pratap Shahi, the petitioner challenged the proceedings under Section 148 read with Section 147 and the order passed under Section 148A(d) of the Income Tax Act, 1961 passed by the Assessing Authority on grounds that there was no relevant material which may give rise to the initiation of reassessment proceedings.

It was submitted that M/s Omaxe Limited, a third party, was searched where certain material was found, however, no search was conducted on the petitioner. It was submitted that the information collected during the search does not indicate how the petitioner's income had escaped assessment. Since the information was regarding an amount not exceeding Rs. 10,00,000/-, no proceedings could be initiated by Section 149(1)(b) of the Act.

Counsel for the petitioner also submitted that a minimum period of 7 days is to be granted to the petitioner to furnish a reply under Section 148A(b) of the Act, however, the petitioner was only granted 6 days to file a reply.

Section 149(1)(b) provides that no notice under section 148 shall be issued for the relevant assessment year after a lapse of 3 years but not more than 10 years from the relevant AY, when alleged escaped income chargeable to tax in form of asset, entries on books of accounts or expenditure in respect of a transaction or relation to an event or occasion exceeds Rs. 50 lakhs.

The respondent argued that at the stage of proceedings under Section 148A, the relevancy of the material available depends upon the subjective opinion of the Assessing Authority and need not scrutinize the correctness of the material available to him. It was argued that manipulation of the electronic records recovered from M/s Omaxe Limited could be gone into at the stage of reassessment.

Section 148A of the Income Tax Act, 1961 relates to the procedure of inquiry to be followed by an Assessing Officer before issuance of notice under Section 148 of the Act for income that may have escaped assessment.

The division bench comprising Justice Saumitra Dayal Singh and Justice Donadi Ramesh observed that the petitioner did not desire to file any further reply. The Court held that even though the Assessing Authorities ought to follow the timelines of 7 to 30 days as provided in Section 148A(b), the time granted by the authority must not be an empty formality. The Court held that once the opportunity to file a reply was reasonably availed by the petitioner, the technicality could be ignored.

While allowing the appeal, the Court held that even if detailed consideration was given to the reply filed by the petitioner, the Assessing Authority only had to see if it was a “fit case” for initiation of reassessment proceedings.

To Read the full text of the Order CLICK HERE

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