It is incumbent upon AO to decide the case u/s 148A(d) on the basis of the material on record including the reply of the assessee – High Court
In a recent judgment, the Himanchal Pradesh High Court has held that it is incumbent upon the Assessing Officer to decide the case u/s 148A(d) of the Income Tax Act, 1961. The Ao cannot shirk away from his responsibility of deciding the case on the material available on record by simply observing that at the preliminary stage, the contention of the assessee is not acceptable and the same requires a detailed examination.
ABCAUS Case Law Citation:
4599 (2025) (06) abcaus.in HC
In the instant case, the Petitioner assessee had filed a Writ Petition challenging the order passed by the Assessing Officer (AO) under Section 148A(d) of the Income Tax Act, 1961 (the Act) as illegal, arbitrary and contrary to the provisions of law.
The Petitioner was served with the notice under Section 148A(d). As per the reasons recorded, during the relevant Financial Year the assessee had purchased immovable property and earned interest. However, no such transactions related to purchase of immovable properties were declared in the Income Tax Return for the relevant Assessment Year.
The assessee was required to furnish the information called for to verify the above unexplained transactions.
The petitioner replied to the show cause notice and submitted all the necessary documents in support of its case and further pointed out that the immovable property purchased by her was not of the value stated in the show cause. The Assessing Officer though passed a detailed order running into almost 10 pages, however, unfortunately no reason whatsoever has been given in support of the conclusion that the escaped income was more than Rs. 50,00,000/-.
The Hon’ble High Court observed that the Assessing Office had simply observed in the order passed under section 148A(d) that the case was at a preliminary stage and, therefore, the contention of the petitioner is not acceptable and the same requires detailed examination.
The Hon’ble High Court observed that there is no provision of law which provides that an inquiry contemplated under Section 148A must essentially culminate into a notice under Section 148. Rather, it was incumbent upon the Assessing Officer to decide the case in terms of sub Section (d) of Section 148A on the basis of the material on record including the reply of the assessee, whether or not it is a fit case to issue a notice under Section 148 by passing an order with the prior approval of the specified authority.
The Hon’ble High Court further observed that the Assessing Officer cannot shirk away from his responsibility of deciding the case on the material available on record by simply observing that “at the preliminary stage, the contention of the assessee is not acceptable and the same requires a detailed examination”. Notice under Section 148 does have serious civil or evil consequences and cannot be passed so lightly and reasons for the same have to be recorded in the order itself.
The Hon’ble High Court also observed that failure to give reasons amounts to denial of justice. Reasons are live links between the minds of the decision-taker to the controversy in question and the decision or conclusion arrived at. Reasons substitute subjectivity by objectivity. The emphasis on recording reasons is that if the decision reveals the “inscrutable face of the sphinx”, it can, by its silence, render it virtually impossible for the Courts to perform the appellate function or exercise the power of judicial review in adjudging the validity of the decision. Right to reason is an indispensable part of a sound judicial system.
The Hon’ble High Court further noted that the necessity of assigning reason has been repeatedly emphasized by the Hon’ble Supreme Court.
The Hon’ble High Court held that the order passed by the Assessing Officer is bereft of any cogent or plausible reasons, and the same was set aside. The matter was remanded back to the Assessing Officer to decide the same afresh in accordance with law.
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