Correctness Of Information Available Cannot Be Gone Into Prior To Issuance Of Notice U/S 148 Income Tax Act: Allahabad High Court

The Allahabad High Court has dismissed a writ petition challenging the validity of the order under Section 148A(d) of the Income Tax Act, 1961 and the consequential notice under Section 148 of the Act on the grounds that the correctness of the information based on assessee’s defense can be determined in the assessment proceedings under Section 148 of the Act. The scope of enquiry under Section 148A(d) is only to the extent of (un)availability of information suggesting that income has escaped assessment.

Petitioner is engaged in the business of trading of Arecanut (Supari), Chopped Betal Nut and Sweet Betal Nut in the name of his proprietary concern, “S.K.L. Enterprises”. The jurisdictional authority issued a show cause notice under Section 148A(b) along with certain information available with the assessing officer to suggest that income chargeable to tax had escaped assessment. Detailed objection was filed before the authority denying the allegations made in the notice. Further, request was made for providing the information relied upon for invoking such proceedings and to provide opportunity of cross-examination of the suppliers.

On 29.3.2023, order under Section 148(d) of the Act was passed rejecting the petitioner’s objection to the said notice on the ground that information exists to suggest that transactions referred to in the notice are fictitious and without actual supply of goods. Thus, income had escaped assessment and proceedings under Section 148 of the Act could be initiated. The request for cross-examination of suppliers and furnishing of material was declined considering the time-barring nature of the matter. On the same day, consequential notice under Section 148 of the Act was issued. Aggrieved by the said order and the consequential notice, the petitioner approached the Court.

The bench comprising of Justices Ashwini Kumar Mishra and Shiv Shanker Prasad held that merits of the information referable to Section 148A remain subject to the reassessment proceedings initiated vide notice under Section 148 of the Act, as the final order passed by the assessing authority under Section 147 for reopening assessment is appealable under Section 246-A of the Act.

The Court further opined that if information is available from the documents appended to the order passed under Section 148A(d), formation of opinion by the assessing authority cannot be questioned based on the detailed reply filed by the petitioner on merits of the case, including opportunity to cross-examine witnesses or by demanding documents relating to such information.

Additionally, with regard to the maintainability of the writ petition, the Court held “Maintainability of the writ petition against the order passed under section 148A(d) is distinct from the scope of adjudication available qua the order passed under section 148A(d) of the Act. The limited scope available under Article 226 of the Constitution of India to adjudicate an order passed under section 148A(d) of the Act, 1961 would be confined to existence of the information only, in view of the scheme of the Act of 1961. A contrary construction cannot be culled out from the judgment of the Supreme Court of India in Red Chilli International Sales (supra).” [Referring to Red Chilli International Sales v. Income Tax Officer, [2023] 146 taxmann.com 224 (SC)]

Case Title: Deepak Kumar Yadav v. Principal Commissioner of Income Tax and Anr. 2023 LiveLaw (AB) 206

Case Citation: 2023 LiveLaw (AB) 206

Counsel For Petitioner: Ashish Bansal

Counsel For Respondent: Gaurav Mahajan

Click Here To Read/Download Order