Information from ‘Insight Portal’ Valid for Reassessment u/s 148 of Income Tax Act: Rajasthan HC dismisses Writ Petitions [Read Order]

The Rajasthan High Court has dismissed a writ petition, upholding the use of information gleaned from the ‘insight portal’ of the Income Tax Department as grounds for reopening income tax assessments under Section 148 of the Income Tax ( IT ) Act, 1961.

M/s Tirumala Enterprises, the petitioner, engaged in trading of marbles, stones, granite etc. is regularly filing income tax return and also filed their income tax return for the assessment year 2019-20 on 29.10.2019 declaring a total income of INR 3,13,390/-.

Multiple assessees filed writ petitions contesting the decision of the Income Tax Officer ( ITO ) to reopen their income tax assessments. The central argument revolved around the validity of the information used - data obtained from the department's ‘insight portal.’

The assessees contended that this information lacked credibility and did not constitute the kind of information suggesting income escapement envisaged under Section 148 of the IT Act. This section empowers the ITO to issue a notice for reassessment if they have reason to believe that taxable income has not been declared in a previous year.

The assessees, represented by Prateek Gattani, challenged the validity of the information itself. They argued that information from the ‘insight portal’ lacked credibility and could not be considered the kind of information envisaged under Section 148.

It was contended that the information needed to be more specific and concrete to initiate reassessment proceedings.

Secondly, the petitioners argued that they were denied their right to be heard as mandated by Section 148A of the IT Act ( effective from April 1, 2021 ). This section requires the ITO to issue a show-cause notice explaining the reasons for potential reassessment before proceeding. The assessees claimed that not being provided with the underlying evidence behind the ‘insight portal’ flag significantly hampered their ability to respond effectively to the ITO's notice.

The petitioners further cited a previous case of Micro Marbles Private Limited vs. The Office of the Income Tax Officer, where a Division Bench held that the material on which the assessing authority has placed reliance to initiate proceedings under Section 148 of the IT Act is required to be supplied to the assessee.

Hence, the petitioners submitted that in the present case, admittedly, the material on which the Jurisdictional Authority has placed reliance has not been supplied to the petitioner; therefore, the order passed by the Jurisdictional Authority under Section 148A(d) and consequential notice under Section 148 of the IT Act are liable to be quashed and set aside.

K.K. Bissa and Hargovind Chanda, counsel for the respondents, have vehemently opposed the writ petitions and argued that the information on which the Jurisdictional Authority has placed reliance while issuing notice to the petitioner under Section 148 of the IT Act has been supplied to the petitioner, and after considering the reply filed on behalf of the petitioner in response to the said notice, the impugned order has been passed, which is perfectly by the law.

The Rajasthan High Court recognised the importance of Section 148A, which ensures that the assessee has a fair opportunity to understand the rationale behind the proposed reassessment. However, the court also distinguished between the right to be heard and the right to access the raw evidence behind the ITO's initial information.

The Division Bench of Justice Vijay Bishnoy and Justice Nupur Bhati held that as long as the show-cause notice adequately explains the source of the information ( i.e., ‘insight portal’ ) and the justification for reassessment, the ITO has fulfilled its obligations under Section 148A.

 In this case, the court found that the show-cause notices sufficiently explained the reasons for potential reassessment and the reliance on information from the ‘insight portal’ as part of the department's risk management strategy.

Therefore, the court dismissed the writ petitions filed by the assessees, upholding the ITO's authority to use information from the ‘insight portal’ for initiating reassessment proceedings under Section 148 of the Income Tax Act.

To Read the full text of the Order CLICK HERE

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