Conduct Of Enquiry As Per Sec 148A Is Not Mandatory But Discretionary: Calcutta HC Upheld Reopening Proceeding

Pointing that the information which was furnished to the assessee though contained information pertaining to the three assessment years, the information called for in the notice dated Mar 31, 2023 pertained only to the assessment year 2016-17, the Calcutta High Court upheld the reassessment proceedings despite the fact that Section 148A(b) notice issued for AY 2016-17 was accompanied with annexure containing information for multiple AYs.

The Division Bench comprising Chief Justice T.S. Sivagnanam and Justice Supratim Bhattacharya observed that “The stipulation under Clause (d) has been complied with by the assessing officer who has taken a decision, on the basis of the material available on record including the reply/replies given by the assessee and found that the case of the assessee for the assessment year under question namely 2016-2017 is a fit case to issue notice under Section 148 of the Act and prior approval of the specified authority has also been obtained. Thus, the provision of the Section 148A of the Act has been scrupulously followed by the assessing officer and there is no error in the decision-making process of this court to interfere”. (Para 13)

As per the brief facts of the case, the Assessee-Company, was subjected to reassessment and was served with notice under Section 148A(b) on the ground that there were high value cash deposit during the demonetization period, i.e. from Mar 2016 to Mar 2017, in two of Assessee's bank accounts. Further, in the annexure to the notice, it was mentioned that the Assessee made cash deposits in several years and details of deposits for FY 2016-17, 2017-18 and 2018-19 were furnished. The Assessee objected that notice for the AY 2016-17 has been issued but documents in relation to the AY 2017-18, 2018-19 and 2019-20 have been called for against which the AO issued clarification that only information for AY 2016-17 was to be furnished. The ITO held that the cash deposits made in the bank accounts of Assessee remained unexplained, as the Assessee failed to produce any credible evidence to explain the source of cash deposits. After dismissing Assessee's objections, the ITO passed an order under Section 148A(d). The matter went before the Single Judge Bench, where it was held that the notice for commencement of re-assessment was not issued for multiple years.

The Division Bench pointed out that the AO, in response to Assessee's objection that notice cannot be issued by clubbing three AYs, in no uncertain terms clarified through an email, that they were required to submit the details of cash deposits made in a particular bank account in the name of the Assessee during the AY 2016-17.

At the same time, the Bench dismissed the Assessee's contention that the Revenue sought to amend the notice under Section 148A(b) by issuance of the email which is impermissible under law, and held the same to be devoid of any merits.

Even though the information pertaining to the three AYs i.e. 2017-18, 2018-19 and 2019-20, were contained in the notice under Section 148A(b), however the reassessment was sought to be initiated and information was also called for, only for AY 2016-17, clarified the Bench.

Thus, the Bench opined that the email sent by the Revenue, clarifying that the information with regards to AY 2016-17, was only required to be submitted by the Assessee, cannot be construed to be an amendment of the notice u/s 148A(b).

The Bench also remarked that, Assessee's repeated attempts for seeking adjournments shows that the Assessee attempted to drag the matter fully knowing well that the assessment will be time barred.

The Bench also emphasized that the AO had complied with the procedure u/s 148A(b), i.e., to provide an opportunity of being heard to the Assessee by serving a notice to show cause, as to why a notice under Section 148 should not be issued based on the information which suggests that the income chargeable to tax has escaped assessment.

The Bench further pointed that the AO also complied with procedure under Section 148A(c) and 148A(d) by considering Assessee's response to the notice under Section 148A(b) and by making decision based on the material available on record including the reply/replies given by the Assessee.

Therefore, the High Court dismissed Assessee's appeal after finding that Section 148A has been scrupulously followed by the AO and there was no error in the decision-making process.

Counsel for Appellant/ Taxpayer: Pranit Bag, Anujit Mookherjee & Prithish Chandra

Counsel for Respondent/ Department: Vipul Kundalia & Anurag Roy

Case Title: Champa Impex Private Limited Verses Union of India

Case Number: APO No. 124 of 2023

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