Procedure U/S 148A Need Not Be Complied With Before Issuing Reassessment Notices: Kerala High Court

The Kerala High Court has held that the procedure contemplated by the provisions of Section 148A of the Income Tax Act, 1961, need not be complied with before issuing notices under Section 148 of the Income Tax Act, 1961.

The bench of Justice Gopinath P. has observed that when an item or cash, as in this case, is produced before a Criminal Court, then it is not open to the Income Tax Department to issue a notice under Section 132A of the Income Tax Act, 1961 Act, to the Court in question. Once the item is produced before the Court in connection with any criminal case registered by the Police or any other law enforcement agency, an application for release of the same or for giving custody of the same to the Income Tax Department can only be in accordance with the provisions of the Code of Criminal Procedure and specifically Section 451 Cr.P.C. It does not take away from the fact that the department initiated proceedings under Section 132A of the Income Tax Act, 1961, to requisition the amount from the station house officer.

The petitioner/assessee has approached the Court challenging notices issued under Section 148 of the Income-tax Act, 1961, for the assessment years 2020–2021, 2023–2024. The specific ground raised before the Court was that a reading of the notice indicates that the procedure contemplated by Section 148A has not been followed before issuing the notices. It is the case of the petitioner that the reference to Section 132A in the notices is only to get over the formalities contemplated by Section 148A, and the facts and circumstances of the case indicate that Section 132A is not applicable.

The assessee contended that, as per Section 148A, the conduct of an inquiry provided opportunity to the assessee before issuing notice under Section 148A. By virtue of the 1st proviso to Section 148A, the procedure is dispensed with only in case a search is initiated under Section 132 or the books of account, other documents, or any assets are requisitioned under Section 132 A in the case of an assessee on or after April 1, 2021.

The assessee submitted that certain amounts of cash were recovered from one Muhammed Salih and one Sabeer Ali. The cash was seized by the police, and the same was produced before the Judicial First Class Magistrate Court, Nilambur, in Crime No. 100 of 2022, registered by the police. The Income-tax Department filed an application under Section 451 Cr.P.C. before the Judicial First Class Magistrate Court to release the money to the department. The Court found that the money in question ought to be released to the petitioners and others who had approached the Court. Therefore, it cannot be said that it is a case covered by the provisions of Section 132A, as the money in question was never requisitioned as contemplated by the provisions of Section 132A.

The assessee contended that any notice under Section 148 without following the procedure contemplated by Section 148A would have to be declared illegal and unsustainable in law.

The Income Tax Department contended that on getting information that certain amounts had been seized by the police, a requisition under Section 132A had been issued by the Income Tax Department to the Station House Officer. On being informed that the amounts seized from the persons had been produced before the Judicial First Class Magistrate Court, the Income Tax Department filed an application under Section 451 Cr.P.C., as going by the judgment of this Court in R. Ravirajan and Others v. State of Kerala; 2023 (4) KLJ 423, the provisions of Section 132A of the 1961 Act cannot be applied to requisition something in the custody of a Court. The filing of an application under Section 451 Cr.P.C. cannot, therefore, be fatal to the issuance of notices under Section 148 without following the procedure under Section 148A, as the provisions of Section 132A were actually invoked in the facts and circumstances of the case.

The court held that once the item is produced before the Court in connection with any criminal case registered by the Police or any other law enforcement agency, an application for release of the same or for giving custody of the same to the Income Tax Department can only be in accordance with the provisions of the Code of Criminal Procedure and specifically Section 451 Cr.P.C.

“I have no option but to hold that this is a case covered by the 1st proviso to Section 148A of the 1961 Act. Therefore, the procedure contemplated by the provisions of Section 148 A of the 1961 Act need not be complied with before issuing Exts.P1 to P4 notices under Section 148 of the 1961 Act. No other point has been raised. The writ petition fails, and it stands dismissed in limine,” the court said.

Counsel For Petitioner: Bejoy Joseph P.J.

Counsel For Respondent: Navaneeth N. Nath

Citation: 2024 LiveLaw (Ker) 194

Case Title: Muhammed C K Versus Assistant Commissioner Of Income Tax

Case No.: WP(C) No. 9269 OF 2024

Click Here To Read The Order