High court orders inquiry for manipulation of reasons to believe and role of the AO. Recommends strict disciplinary action for playing a subterfuge by back dating the records
ABCAUS Case Law Citation:
ABCAUS 2473 (2018) 08 HC
Important Case Laws Cited/relied upon by the parties:
Haryana Acrylic Manufacturing Co. Vs. CIT
In the instant Petition, the assessee had sought directions for the quashing of the assessment notice issued under Section 147/148 of the Income Tax Act, 1961 (the Act).
The assessee was served with the impugned notice, proposing to reassess his income on the. However, the “reasons to believe” were supplied to the assessee not before his repeated requests and that too after 18 months from the date of the issue of the notice.
As per the reasons supplied, the assessement was sought to be reopened, on the pretext that the transaction resulting in short term capital gains which was set off against income was not genuine and was a abacus.in device to avoid tax, to claim loss that was not warranted due to the relationship with the buyer being father of the assessee.
The assessee objected to the reassessment notice. However the objections were turned down and hence the instant petition was filed by the assessee.
The petitioner submitted that the alleged reasons to believe had not been recorded on or before the date when the impugned notice was issued to him as there was no reason why those alleged reasons recorded were not furnished to the petitioner but after 18 months.
It was argued that the delay to furnish the alleged reasons recorded was highly inordinate i.e. 18 months from the date of initiation of proceedings under Section 147 of the Act and, entirely unreasonable, which itself showed that no reasons to believe were recorded as alleged when the notice under Section 148 of the Act was issued.
It was highlighted that the AO before initiating proceedings under section 147 of the had not recorded any reasons to believe prior to issue of the notice under Section 148 of the Act, as is mandated under Section 148(2) of the Act.
The Hon’ble High Court observed that from the documents and file notings, it was discernable that the reasons claimed to had been recorded before issuance of impugned notice did not seem to have been so recorded on that date, but were recorded subsequently, much later.
It was noted that the “reasons to believe” stated that the return was processed u/s 143(1) of the Act and subsequently two refunds were issued to the assessee after passing the orders under Section 154 of the Act. However, one abacus.in of the refund was issued much later than the date of the impugned notice and an the said order under Section 154 was also passed after the date claimed for recording of reasons to believe.
The Hon’ble High Court opinion that in view of the circumstances, the reasons had been recorded only after passing of the order u/s 154 and not before. The inescapable inference from the records made available was that but the “reasons to believe” had not been recorded as claimed i.e. prior to the issue of notice under Section 148 of the Act but were recorded later.
Therefore, the court opined that the official record proved the allegations that no reasons were recorded prior to the issue of the impugned notice which is a mandatory requirement under section 148(2) of the Act.
The Hon’ble High Court further observed that new numbers had been assigned to the old page numbers in order to manipulate the placement of the documents. Also, the copy of reasons recorded was in “Arial Font”, whereas the documents of the same date were in “Times New Roman Font”. These facts also corroborated the circumstance that the reasons were not recorded before the issuance of the impugned notice, as alleged by the petitioner.
The Hon’ble High Court opined that whilst the “reasons” shown to it and the petitioner might ipso facto not be faulted, yet the file told a different story; they were not recorded before the impugned notice was issued. In fact, the revenue played a subterfuge, in trying to cover up its omission, and in ante dating the record, in the attempt to establish that such reasons existed.
Irked by the said manipulation, the Hon’ble High Court directed the Chief Commissioner to conduct an inquiry as to the involvement of the officials or employee in the manipulation of the record and take strict disciplinary action. It was further directed that the inquiry should be in regard to the conduct of the concerned AO posted at the time, who issued the notice under Section 147/148 as well as the officers who filed the affidavits before the High Court.
Revenue was given a time of four months for completing investigation and consequential action.
The writ was allowed and the impugned reassessment notice and all subsequent orders, made pursuant thereto were quashed. The matter was ordered to be listed for the revenue to report its action, to the court, in the form of an Action taken Report