Case Note & Summary
The petitioner, Mr. Sanath Kumar Murali, filed a writ petition under Articles 226 and 227 of the Constitution of India before the High Court of Karnataka at Bengaluru challenging the order dated 21.03.2023 passed under Section 148A(d) of the Income Tax Act, 1961 (I.T. Act) and the notice dated 21.03.2023 issued under Section 148 of the I.T. Act for the Assessment Year 2016-2017. The petitioner is an individual assessee. The background of the dispute is that on 03.03.2023, the Income Tax Officer, Ward 4(3)(3), Bangalore (first respondent) issued a notice under Section 148A(b) of the I.T. Act to the petitioner, based on information received from the investigation wing regarding certain alleged accommodation entries. The petitioner filed a detailed reply on 13.03.2023, explaining the transactions and providing supporting documents. However, the first respondent passed the impugned order under Section 148A(d) on 21.03.2023, rejecting the petitioner's explanation and concluding that there was reason to believe that income had escaped assessment. Simultaneously, a notice under Section 148 was issued for reassessment. The petitioner contended that the Assessing Officer did not independently apply his mind to the information and merely reproduced the allegations from the investigation wing without considering the petitioner's reply. The court, after hearing both sides, found that the order under Section 148A(d) did not reflect any independent application of mind by the Assessing Officer. The order merely reproduced the information from the investigation wing and did not address the specific submissions made by the petitioner in his reply. The court held that the procedure under Section 148A requires the Assessing Officer to consider the assessee's reply and pass a reasoned order. Since the impugned order failed to do so, it was not sustainable. Consequently, the notice under Section 148, which was based on the invalid order, also could not stand. The court quashed both the order dated 21.03.2023 under Section 148A(d) and the notice under Section 148 of the I.T. Act. The writ petition was allowed.
Headnote
A) Income Tax - Reassessment - Section 148A(d) and Section 148 of the Income Tax Act, 1961 - Validity of Reassessment Proceedings - The Assessing Officer issued notice under Section 148A(b) based on information from the investigation wing regarding alleged accommodation entries. The petitioner filed a detailed reply. The Assessing Officer passed an order under Section 148A(d) and issued notice under Section 148 without independently applying his mind and without properly considering the petitioner's reply. The court held that the order and notice were not sustainable as the Assessing Officer failed to apply his independent mind and merely reproduced the information from the investigation wing. (Paras 2-5) B) Income Tax - Natural Justice - Section 148A of the Income Tax Act, 1961 - Opportunity of Hearing - The Assessing Officer must consider the assessee's reply and pass a speaking order. In this case, the order under Section 148A(d) did not reflect any consideration of the petitioner's submissions. The court held that the order was in violation of principles of natural justice and quashed the same. (Paras 4-5)
Issue of Consideration
Whether the order passed under Section 148A(d) and the notice under Section 148 of the Income Tax Act, 1961 are valid when the Assessing Officer did not independently apply his mind to the information received from the investigation wing and merely reproduced the same without considering the assessee's reply.
Final Decision
The writ petition is allowed. The impugned order dated 21.03.2023 passed under Section 148A(d) of the Income Tax Act, 1961 (Annexure-A) and the impugned notice dated 21.03.2023 issued under Section 148 of the Income Tax Act, 1961 (Annexure-B) are quashed.
Law Points
- Reassessment under Section 148A requires independent application of mind by the Assessing Officer
- Information from investigation wing must be examined independently
- Section 148A(d) order must reflect proper consideration of assessee's reply
- Notice under Section 148 must be based on valid reasons recorded
