S.148 Income Tax| For Assumption Of Jurisdiction Satisfaction Needs To Be Bonafide, No Need To Record “Reason To Believe”: Allahabad High Court

The Allahabad High Court has held that under the new law, it is not necessary for the assessing authority to record “reasons to believe”. The Court held that the assessing authorities are only required to record bonafide satisfaction regarding escapement of income for assuming jurisdiction under the Income Tax Act, 1961.

The bench comprising of Justice Saumitra Dayal Singh and Justice Manjive Shukla held,

“under the amended law, it is no longer, the obligation of the Assessing Authority to record a "reason to believe", before assuming jurisdiction to reassess an assessee. A bonafide satisfaction reached as to escapement of income made suffice the test of valid assumption of jurisdiction.”

Petitioner challenged the he reassessment proceedings initiated against the petitioner under Section 148 of the Income Tax Act on grounds that the notice Sunder Section 148A was issued based on certain cash purchases made by the petitioner. Though the petitioner relied on audited balance sheet, tax audit report, income tax return, purchases ledger account, ledger account of M/s Bait-Al-Tamurat and bank statements in its reply, the Assessing Authority rejected the reply on a separate ground that the purchases were outside the books of accounts.

It was argued that the allegation of purchases made outside was never made against the petitioner before passing the order under Section 148A of the Act of 1961. It was argued that there was no cogent material with the Assessing Authority to proceed against the petitioner.

Counsel for respondent argued that the proceedings were initiated based on the satisfaction reached relying upon the material and evidence discovered in survey against M/s Bait-Al-Tamurat.

The Court observed that the petitioner could not establish that the purchases were made through banking channels or that no such purchases were made at all. the quantum of purchase actually made and the purchase made through banking channels was verifiable at the stage of reassessment.

The Court held that “for the purposes of assumption of jurisdiction, all that is required to be seen is, if the satisfaction is bonafide.”

Since there was no objection to the existence of information regarding purchases, the Court held that all pleas raised by the petitioner could be examined in reassessment proceedings. Accordingly, the writ petition was dismissed.

Case Title: Shri Durga Trading Co vs. Income Tax Officer And Another 2024 LiveLaw (AB) 75 [WRIT TAX No. - 1482 of 2023]

Citation: 2024 LiveLaw (AB) 75

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