Income Tax Act | Writ Petition Can Be Entertained To Examine If Conditions To Issue Section 148 Notice Are Satisfied : Supreme Court

The Supreme Court recently set aside an order of the Punjab and Haryana High Court which dismissed a writ petition filed by an assessee against a notice issued under Section 148A of the Income Tax Act 1961 for reopening assessment.

The High Court had dismissed the writ petition on the ground of availability of alternative remedy.  Taking exception to the High Court's approach, the Supreme Court observed that writ petitions have been entertained to examine whether the conditions for the issuance of notice under Section 148 of the Income Tax Act have been satisfied.

"The provisions of reopening under the Income Tax Act, 1961 have undergone an amendment by the Finance Act, 2021, and consequently the matter would require a deeper and in depth consideration keeping in view the earlier case law", observed the bench comprising Justices Sanjiv Khanna and MM Sundresh while directing the High Court to examine the issue in depth.

The petitioner received notice under Section 148A(b). The details of the information that led to the issuance of a notice under Section 148A(b) were also provided to the petitioner. The petitioner responded and raised objections. The objections were decided by an order passed under Section 148A(d). Along with the order, the petitioner was also served with notice under Section 148. The petitioner objected to both the order issued under Section 148 A(d) and the notice issued under Section 148 of the even date, claiming that the petitioner's response to the notice under Section 148A(b) was ignored.

The issue raised was whether, at the stage of notice, the writ Court should venture into the merits of the controversy when AO is yet to frame assessment/reassessment in the discharge of statutory duty cast upon him under Section 147 of the Income Tax Act.

The Punjab and Haryana High Court has held that where the proceedings have not even been concluded by the statutory authority, the writ court should not interfere at such a premature stage. Furthermore, it is not a case in which the authority can be held axiomatically to have grasped jurisdiction not vested in it based on a cursory reading of the notice. The correctness of the order under Section 148A(d) is being challenged on the factual premise that vested jurisdiction has been wrongly exercised. The distinction between jurisdictional error and error of law or fact within the jurisdiction is well established. For the rectification of errors, a statutory remedy has been provided.

The High Court has noted that there is no reason to warrant interference in the exercise of the jurisdiction under Article 226 or 227 of the Constitution of India at the intermediate stage when the proceedings initiated are yet to be concluded by a statutory authority.

The Apex Court held that the provisions of reopening under the Income Tax Act, 1961, have undergone an amendment by the Finance Act, 2021, and consequently, the matter would require deeper and more in-depth consideration.

“The special leave petition is disposed of. We clarify that the dismissal of the special leave petition would not be construed as a finding or observations on the merits of the case,” the court said.

Case Title: Red Chilli International Sales Versus ITO

Citation: 2023 LiveLaw (SC) 16

Date: 03.01.2023

Counsel For Petitioner: Advocate Rana Gurtej Singh, Ravinder Singh, Raveesha Gupta, Mantika Haryani, Sanjeev Kaushik, Shreyas Awasthi, Nikhil Goyal, Srisatya Mohanty, Muskan Surana, Astha Sharma

Income Tax Act 1961 - Section 148, Section 148A - Writ petition can be entertained to examine if conditions for issuance of notice under Section 148 have been satisfied

Click Here To Read The Order