Invalid Bank Account in ITR Filed: Rajasthan HC Sets aside Proceedings u/s 148A of Income Tax Act due to Procedural Violation [Read Order]

In a recent case related to the validity of the bank account mentioned in the Income Tax Return (ITR) filed, the Rajasthan High Court set aside the proceedings initiated under 148A of the Income Tax Act, 1961, due to a procedural violation.

Prateek Bulls And Bears Private Limited, the petitioner filed writ petition for quashing of the notice dated 14.03.2022 issued under Section 148(b) of the Income Tax Act, 1961 (‘the Act’) for the Assessment Year 2018-2019 and the order dated 31.03.2022 passed under Section 148A(d) of the Act.

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The petitioner filed the return for the relevant assessment year declaring the income of Rs.2,39,47,140/-. A notice dated 14.03.2022 under Section 148A(b) of the Act was issued annexing the reason that in the assessment year 2018-19 there was a credit entry of Rs.4,50,00,000/- and debit entry of Rs.4,50,71,468/- in the bank account No.3042833. The petitioner in response dated 21.03.2022 stated that the petitioner has no bank account having the number mentioned in the notice.

Further that the petitioner had a bank account with ICICI Bank, which was closed on 08.02.2010, the proof of closure of the bank account was enclosed. Order dated 31.03.2022 was passed holding that the objections are not tenable for the failure of ICICI Bank to respond to the notice issued on 25.03.2022 by the Assessing Officer (for brevity ‘AO’) under Section 133(6) of the Act.

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Counsel for the petitioner argued that petitioner denied that the bank account mentioned in the notice belongs to it. The documents relating to closure of the bank account of the petitioner with the ICICI Bank were attached. The objections were decided in haste within six days of issuance of notice to bank. Submission is that the bank through an e-mail dated 06.04.2022 and 18.05.2022 responded to the notice of AO. The factum of closure of account of the petitioner with the ICICI Bank was accepted. Further it was stated that the account number mentioned in the notice does not exists with the bank.

Per contra the petitioner had not explained the entries in the account number mentioned in the notice rather had given a different account number which was closed. It is further submitted that the e-mail was received after passing of the impugned order.

Section 148A of the Act stipulates that before initiating the proceedings under Section 148 of the Act, with prior approval of the specified authority the A.O. if so, required may conduct an enquiry with regard to the information suggesting escaped assessment. The assessee is to be provided an opportunity of hearing by issuing notice specifying the date of not less than seven days but not exceeding thirty days, which may be extended on application. The information relied upon for reassessment and outcome of enquiry if conducted any, is to be supplied. In case of information having been received from investigating wing or other agency, brief summary of information along with relevant portion of report and details of documents relied upon is to be supplied.

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The decision that if it is a fit case for issuance of notice under Section 148 is to be taken with prior approval of the specified authority, on the basis of material available on record and after considering the reply filed by the assessee.  The order is to be passed within one month from ending of the month when reply was filed and in case no reply was filed within one month from end of month when time to file reply expires.

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From perusal of the reasons annexed with the notice issued under Section 148A(b) of the Act, it is evident that name of the bank in which the account was maintained is not mentioned. Inspite of the mandate of Section 148A of the Act, circulars and guidelines issued by the department that material relied upon should be supplied to the assessee, the casualness in which the reasons are supplied, is evident. Vague information was supplied and in absence of name of bank it becomes impossible for the assessee to file response.

The petitioner filed objections on 21.03.2022 denying that the account number does not belong to it, giving details of the bank account with the ICICI Bank which was closed, the proof thereof was annexed. The AO issued notice to the bank on 25.03.2022 and without waiting for reasonable time or giving reminder or making any efforts to verify the fact from the bank, brushed aside the objections stating that no response has been received from the bank.

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In the reply filed by respondent before  court, the e-mail received from the bank that the account of the petitioner with the ICICI Bank was closed in the year 2010 and further that the account number mentioned in the notice does not exist with the ICICI Bank has not been denied.

The court noted that the e-mail was of April and May, 2022 and respondent filed reply on 22.02.2023 i.e. almost eight months after receipt of the e-mail. In reply filed, there is no pleading that the bank account number mentioned in the notice was of some other bank than ICICI or that there is even a prima-facie material with the department that the bank account mentioned in the notice belonged to the petitioner. There is no reason put-forth for hurriedly passing the impugned order within five days of sending email.

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A division bench of Justice Avneesh Jhingan and  Justice Ashutosh Kumar observed that the objections were not decided in accordance with Section 148A and the guidelines issued for procedure to be followed in proceedings under Section 148A of the Act. E

The department miserably failed to put an iota of evidence to even prima-facie show that the bank account mentioned in the notice belonged to the petitioner and the name of the bank of which account number belongs is not disclosed. While allowing the appeal, the court quashed the impugned order. 

To Read the full text of the Order CLICK HERE

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