Reopening proceedings upheld though the notice u/s 148 wrongly stated that no return was filed as reopening was not based on non-filing of ITR
In a recent judgment, Hon’ble Bombay High Court upheld the initiation of reopening proceedings u/s 147 where though the notice u/s 148A(d) wrongly stated that no return was filed but the reopening was not based on non-filing of ITR but was based on the information in accordance with the Risk Management Strategy Formulated by the CBDT.
ABCAUS Case Law Citation:
4473 (2025) (03) abcaus.in HC
In the instant case, the Petitioner/assessee had filed a Writ Petition challenging the order passed under Section 148A(d) and notice issued u/s 148 of the Income Tax Act, 1961 (the Act).
The petitioner was an individual. For the relevant Assessment Year, the petitioner had filed his original return of income inter alia, disclosing capital gain. The said return was revised subsequently but the capital gain disclosed remained intact.
The return of income was selected for a scrutiny assessment vide notice under Section 142(1) of the Act. The petitioner was called upon to furnish the copy of bank statement, copy of form No.26-AS, re-conciliation of the receipts with return of income, documentary evidence for claim of deduction under Chapter VI-A, etc.
Subsequently, assessment order under Section 143(3) was passed by the Assessing Officer (AO), who accepted the return of income. The assessment order recorded that the scrutiny was limited to only verifying deductions under Chapter VI-A.
After a gap of more than four years, a notice under Section 148A(b) of the Act was issued for the relevant Assessment Year. In the annexure to the said notice, it was stated that the AO had received the information in accordance with the Risk Management Strategy Formulated by the Central Board of Direct Taxes (CBDT) and as per the said information, it was alleged that the petitioner had received large amount of cash which was undisclosed and further the credit card transaction also required to be verified. In the annexure, it was further stated that neither of these transactions had been accounted for, and therefore, the income charged to tax had escaped assessment. Interestingly, the said annexure to the notice further stated that since the return of income had not been filed, income chargeable of tax had escaped assessment for relevant Assessment Year, and therefore the petitioner was required to show cause as to why the notice under Section 148 should not be issued on the basis of the above information.
The petitioner filed a letter objecting to the above show cause notice and made submissions. Concerning the credit card transaction, the petitioner enclosed the bank statement and submitted that the credit card expenses pertain to the general and travel expenses of the petitioner and his family. Similarly, concerning the alleged cash receipt, the petitioner made his submission on the merits as to why the same cannot be added as income in his hands. The petitioner also enclosed the sale deed valuation report, etc., supporting his objections. No jurisdictional issue was raised in the objections.
However, rejecting the reply of the Petitioner, the AO passed order under Section 148A(d) rejecting the petitioner’s objection. Along with the order of rejection, the petitioner was also served with a copy of approval under Section 151 of the Act. The order of rejection was followed by a notice under Section 148 of the Act.
Before the Hon’ble High Court the Petitioner contended that the Department in the information provided proceeded on any erroneous assumption that the petitioner had not filed his return of income, whereas, in fact, the petitioner had filed his return of income and which fact had not been denied in the order rejecting the objection. Therefore, the very basis of re-opening the case falls to ground.
Secondly, relying on Clause (iv) of Explanation 2 to Section 148 and the second proviso to Section 148 as it exists before Finance (No.2) Act of 2024, the Petitioner submitted that the Department ought to have issued notice under Section 153C of the Act and not under Section 148 of the Act, since in the present case the search in the case of a party to whom the land was sold took place which was prior the date and therefore provisions of Section 148 as amended would not be applicable.
It was also argued that the issues were examined during the course of the assessment proceedings since the bank statement was furnished in the course of the regular assessment proceedings. In view thereof, it was submitted that the impugned proceedings are without jurisdiction and ought to be quashed. The Petitioner relied upon the decision of Delhi High Court and the decision of the co-ordinate bench of the Bombay High Court.
The Hon’ble High Court rejected the submission that issues were already examined and, therefore, the proceedings were without jurisdiction. The Hon’ble High Court observed that the issue of alleged cash receipt was not examined during the course of the regular assessment proceedings since the information from Faridabad Officer was received after the conclusion of the assessment proceedings. Further, in the questionnaire issued during the scrutiny there was no query on credit card expenses or alleged cash receipt. Also, the return was subjected to only limited scrutiny assessment for verification of deduction under Chapter VI.
The Hon’ble High Court also rejected the submission that notice 148A(b) wrongly stated that no return was filed, therefore notice was invalid. The Hon’ble High Court opined that reopening has to be done based on “information” and the said information had been reproduced in the annexure to the notice under Section 148A(b). It was based on the said information that the reopening proceedings were initiated. Although the Department in the annexure to the notice stated that the return had not been filed, but prima facie, that was not the basis on which the reopening was sought. The reopening was based on the information in accordance with the Risk Management Strategy Formulated by the CBDT.
Regarding the reliance placed on the decision of Delhi High Court, the Hon’ble High Court held that it was not applicable since Delhi High Court was concerned with pre-amended Section 148 and the pre-amended law did not use the phrase “information”. Insofar as, the decision of Co-ordinate Bench was concerned the Hon’ble High Court held that it was distinguishable on facts since that was not the case where information of alleged unaccounted cash receipt was received.
Accordingly, the Petition was dismissed.
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