Rajasthan HC quashes Time Barred Issuance of Income Tax SCN and Proceedings u/s 148A(b) [Read Order]

The Rajasthan High Court set aside the order passed against the appellant on the charge that the income chargeable to tax for the assessment year 2015-16 has escaped assessment under the purview of Section 147 of the Income Tax Act, 1961.

The assessee, Bijendra Singh argued that the show cause notice had been based on the assumption that the petitioner's cash transactions amounted to approximately Rs.50,00,000, and the extended period of limitation had been invoked based on this premise. However, it was later confirmed that the transactions were only Rs.33,62,000.

The assessee further contended that the issuance of the notice lacked jurisdiction as it was barred by limitation. Additionally, it was contended that the initiation of proceedings against the petitioner was allegedly triggered by unexplained money deposits. The notice was issued under Section 148A of the Act of 1961, and during these proceedings, the issuance of the show cause notice under Section 69A read with Section 115BBE of the Income Tax Act, 1961, was deemed entirely baseless. The assessee argued that independent of Section 148A of the Income Tax Act, 1961, the authorities could not have invoked these powers. The assessee was served with a notice under Section 148A(b) of the Act of 1961, drawing attention to the information appended to the notice.

The petitioner filed a writ petition expressing dissatisfaction with the order issued under Section 148A(d) of the Income Tax Act, 1961. Pursuant to the said notice, the assessment proceeded, and on 06.03.2023, after considering the submissions made, the authority show caused the petitioner, indicating why the cash deposited to the tune of Rs.33,62,000 in the bank could not be treated as unexplained money of the assessee, and he was asked to show cause under Section 69A read with Section 115BBE of the Act of 1961. Revenue contended that once the assessment order was issued, the petitioner should seek the alternative remedy available. Despite this, it was asserted that the petitioner failed to provide a satisfactory explanation for cash transactions amounting to Rs.15,00,000.

Revenue argued that due procedure had been followed and contended that there were no grounds for interference with the proceeding.

The two-member bench of the Rajasthan High Court, comprising Ashutosh Kumar and Arun Bhansali, observed that "the authority, while passing the order under Section 148A(d) of the Act of 1961, in a wholly mechanical manner rejected the plea and proceeded to issue notice under Section 148 of the Act of 1961. Thereafter, proceedings were sought to be converted into a notice under Section 69A read with Section 115 BBE of Income Tax Act of 1961, which action also is wholly impermissible. Once the notice under Section 148A of the Act of 1961 is found to be barred by limitation, no further proceedings could be initiated under any of the provisions of the Income Tax Act, 1961, and the purported exercise of jurisdiction pursuant to the notice under Section 148A of the Income Tax Act, 1961 could not be initiated or proceeded with." The bench rejected the revenue's claims and set aside the order against the appellant. The court granted the writ petition filed by the petitioner.

The assessee was represented by Siddharth Ranka and Shivangi Mewal. Respondent was represented by  Anuroop Singhi, N.S. Bhati and Mr. Aditya Khandelwal.

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