Landmark Intra-Court Appeal Upholds Income Tax Reassessment Order in Writ Petitioner's Challenge

Introduction

• This article delves into an intra-court appeal filed by a writ petitioner against an order dated 08.05.2023 in WPO No. 929 of 2023. The appellant challenged an order issued under Section 148A(d) of the Income Tax Act, 1961, as well as the consequential notice issued under Section 148 of the Act, dated 07.04.2023. The appellant contested the validity of these proceedings, leading to a dispute that ultimately reached the court's doorstep.

Background

• The appellant contended that the assessing officer's actions were not solely based on the remarks of "potential borrowers/lenders." The officer clarified that credible evidence of actual borrowings by the appellant existed, refuting the notion of transactions being merely "potential." Furthermore, it was revealed that the appellant had availed a substantial cash loan of Rs. 40,70,00,000 through finance broker Kaseras and other lenders. These transactions raised concerns of unexplained expenditures under Section 69C and violations of Sections 269SS and 269T of the Act.

Appellant's Arguments

• Mr. Abhratosh Majumder, the appellant's senior advocate, argued that the assessing officer failed to provide the reasons or information that formed the basis for initiating proceedings. He emphasized the necessity for a rational nexus or live link between the information and the belief that the appellant's income had escaped assessment. Additionally, the appellant claimed that no relevant documents were furnished to support the allegations.
• The appellant's counsel also asserted that the assessing officer initiated the reassessment without independent application of mind and verification. They cited a previous case to argue that relying solely on the investigation wing's report was legally questionable. Furthermore, it was claimed that the order in question failed to address the appellant's contentions raised in response to the notice issued under Section 148A(b) of the Act, thereby violating principles of natural justice.

Respondent's Defense

• On the other side, Mr. Tilak Mitra, the senior standing counsel for the department, argued that the writ court correctly held that the disputed factual issues could not be adjudicated within the writ petition. He emphasized that sufficient evidence had been presented by the assessing officer during the assessment process.

The Court's Verdict

• After extensive deliberations and careful review of the presented materials, the court reached a decision. The court noted that the assessing officer had issued a notice under Section 148A(b) on March 14, 2023, providing information and requiring the appellant to explain their position. The appellant's response, dated March 16 and March 25, 2023, was taken into consideration.
• The court highlighted that the assessing officer had received information suggesting potential tax liability for the relevant year and initiated proceedings based on analysis and verification of available data. It was emphasized that the court's role was not to act as an assessing officer and scrutinize facts and evidence but to determine if there were procedural violations or a lack of jurisdiction.
• In the final analysis, the court found no grounds to interfere with the order passed under Section 148A(d) of the Act. The appeal was dismissed, and no costs were imposed.

Conclusion

• The intra-court appeal in this case revolves around the validity of an income tax reassessment order and the related notice issued to the appellant. The court's decision underscores the importance of procedural fairness and the need for a rational connection between information and the initiation of assessment proceedings. While the appellant's arguments were carefully considered, the court ultimately upheld the order, emphasizing that its role was not to substitute its opinion for that of the assessing officer but to ensure procedural integrity in the process.

Topic-Shyam Sundar Dhanuka V Union of India

Court-Calcutta High Court

Date-30/08/2023

Team Taxonation