High Court quashed reopening on the incorrect presumption that no return filed

High Court quashed reopening of assessment on the incorrect presumption that no return of income had been filed

Re-assessment order u/s 147 quashed as reopening done on wrong assumption of non filing of return of income.

In a recent judgment, Hon’ble Bombay High Court has quashed re-assessment order passed u/s 147 of the Income Tax Act, 1961 (the Act) as reopening order u/s 148A(d) was passed on wrong assumption of non filing of return of income.

AABCAUS Case Law Citation:
ABCAUS 3994 (2024) (05) HC

In the instant case, the Petitioner assessee had filed a Writ Petition impugning the proceedings relating to the passing of the assessment order under Section 147 read with Section 144B of the Act and the order passed under Section 148A(d) of the Act.

The Petitioner had filed the return of income under Section 139(1) of the Act for the AY-2019-20. The return filed by petitioner was accepted under Section 143(1) of the Act.

Thereafter, petitioner received a show cause notice under Section 148A(b) of the Act alleging that the Petitioner was a beneficiary of accommodation entries provider by way of circular trading and evasion of GST. The SCN further stated that the Petitioner had not offered the income for taxation which clearly suggest that the income chargeable to tax has escaped assessment for A.Y. 2019-20 and it needs to be reassessed as per provisions of section 148 of the Act.

The Petitioner replied to the show cause stating that he was the agent of two companies and the alleged amount of accommodation entries represent sale of goods delivered to the alleged accommodation entry provider. It was submitted that total sale had been duly shown in GSTR-1 and 3B and petitioner had paid GST on it. That the sale had been accounted for and petitioner has paid the income tax thereon.

However, the Assessing Officer (AO) passed the impugned order under Section 148A(d) of the Act. In the impugned order, what was stated in the notice under Section 148A(b) had been reiterated.

Before the Hon’ble High Court, the Revenue fairly agreed that petitioner had in fact filed the return of income for the relevant Assessment year.

The Hon’ble High Court observed that the AO had proceeded on the assumption that petitioner has not filed the return of income and, therefore, the income of assessee needs to be assessed.

The Hon’ble High Court opined that reopening, the assessment was fallacious. If, the AO wanted to assess the income of assessee, he could have taken steps for assessment under Section 143(3) of the Act instead of reopening the assessment on the incorrect presumption that no return of income had been filed

The Hon’ble High Court held that the impugned order passed under Section 148A(d) cannot be sustained and the same was quashed and set aside. Consequently, notice issued under Section 148 of the Act and the assessment order under Section 147 read with Section 144B of the Act was also quashed and set aside.

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• Refund can not be denied on the ground that it was claimed in a return filed u/s 148 – ITAT
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• Fit case to issue notice u/s 148 – Relevancy of material & application of mind to objections important
• AO is under an obligation to assign reasons for rejecting explanation of the assessee
• CBIC issues SoP for clearance of imported goods through Foreign Post Offices