High Court stays re-assessment proceedings as order u/s 148A(d) was passed ignoring objection of assessee.
High Court stays re-assessment proceedings notice u/s 148 and order u/s 148A(d) was passed by the AO ignoring the objections raised by the assessee.
In a recent judgment, the Hon’ble Allahabad High Court has stayed the re-assessment proceedings vide notice u/s 148 observing that order u/s 148A(d) of the Income Tax Act, 1961 (the Act) was passed ignoring objection of assessee on the issue of cash deposits
ABCAUS Case Law Citation:
ABCAUS 3938 (2024) (04) HC
In the instant case, the assessee was a partnership firm running a Petrol Pump. The assessee for the Assessment Year 2017-18 filed its return of income in form No. ITR-5 belatedly under section 139(5) of the Act.
The accounts of the assessee were audited u/s 44Ab of the Act by a chartered accountant and the assessee had also filed its audit report in form No. 3CD and Form No. 3CB which within the due date prescribed for filing the audit report.
Through e-proceedings of e-filing portal of the income tax department (ITD), the assessee was issued a show cause notice under clause (b) of section 148A of the Act of 1961. Along with the show cause notice the assessee was provided the copy of the information available as per the first proviso to Section 148 with the Assessing Officer.
It was stated that as per the office record, the assessee had not filed return of income for the said Assessment Year. It was further stated that the information in this case had been identified by the Directorate of Income Tax (Systems), CBDT which showed that during the demonetisation period, the assessee had deposited large amount of cash in its bank account.
The assessee was asked to show cause as to why a notice u/s 148 should not be issued on the basis of information which suggests that income chargeable to tax represented in the form of cash deposited had escaped assessment your case for the assessment year 2017-18.
The assessee through e-proceedings filed its reply to the said show cause notice. The assessee in its reply submitted that the show cause notice has been issued on misplaced information that the assessee had not filed the return of income ITR for the AY 2017-18. The assessee brought to the knowledge of the AO the very fact of filing of the ITR and audit report by the assessee along with proof of it in the form of ITR acknowledgement and copy of audit reports filed electronically which were appearing and available on the e-filing portal.
The assessee also submitted that the said amount of cash deposit had itself been reported by the assessee in income tax return under clause 13(a) of Part-B -TTI.
The assessee also submitted that the said cash deposits were made out of retail sale of petrol, diesel and lubes. It was also submitted that the accounts of the assessee were duly audited and audit report was duly filed within the time prescribed under section 44AB of the Act of 1961.
In essence, the assessee objected to the re-opening and submitted that there had been no escapement of income as alleged in the show cause notice for the AY 2017-18.
However, the AO passed the order under clause (d) of section 148A holding that income chargeable to tax i.e. cash deposited in bank has escaped the assessment. However, the said order was a non speaking one and had been passed in a mechanical manner without application of mind and without adverting to the objections raised by the assessee
The AO while passing the order u/s 148A(d) did acknowledge that the assessee had infact filed the return of income but stated that action u/s 147 was required to verify cash deposit. In sharp contradiction to his acknowledgement of filing of ITR in the preceding para of the order, the AO went on to state that considering all the details and materials available on records, it is clear that the assessee is having taxable income in the relevant financial year. However, he did not file return of income and, therefore, the income chargeable to tax has escaped the assessment.
Accordingly, the assessee was issued notice u/s 148 requiring him to file return of income.
Aggrieved by the order passed u/s 148A(d) and notice u/s 148, the assessee filed a Writ Petition before the Hon’ble High Court.
The Hon’ble High Court observed that the Petitioner assessee in its submission to the show cause notice stated that the cash deposited was duly disclosed in the regular return of tax filed by it for the relevant Assessment Year. Despite clarifying the same, the order under Section 148-A(d) of the Act had been passed by the AO ignoring the objections of the assessee.
In view of the above, the Hon’ble High Court admitted the Writ Petition and stayed the re-assessment proceedings against the petitioner till filing of counter affidavit by ITD and rejoinder by Petitioner.
Download Full Judgment ABCAUS 3938 (2024) (04) HC Click Here >>
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