Important orders under section 148A by DR B Ramaswamy.

ORDERS UNDER SECTION 148A

by

DR B Ramaswamy

Senior Standing Counsel Income Tax

Ministry of Finance, Government of india

(Additonal Government Pleader) (Puducherry Madras High Court )

148A ORDERS

SCOPE OF THE SECTION:

Section 148A of the Income Tax Act outlines the procedure that the Assessing Officer (AO) must follow before issuing a notice under Section 148, which pertains to income escaping assessment. The key elements of Section 148A and its implications are as follows:

1. Conducting Inquiry with Prior Approval:

   - The AO is required to conduct an inquiry with the prior approval of a specified authority when there is information suggesting that income chargeable to tax has escaped assessment.

2. Opportunity of Being Heard:

   - The AO must provide the assessee with an opportunity to be heard by issuing a show-cause notice.

   - The notice must specify a time frame, not less than seven days and not exceeding thirty days, for the assessee to respond. This time frame can be extended based on an application by the assessee.

3. Consideration of Assessee's Reply:

   - The AO is obligated to consider the response provided by the assessee to the show-cause notice.

4. Decision and Approval:

   - The AO, with the prior approval of the specified authority, must decide whether it is a fit case to issue a notice under Section 148.

   - The decision must be made within one month from the end of the month in which the assessee's reply is received or, in case of no reply, within one month from the end of the month in which the time or extended time allowed for a reply expires.

5. Exceptions:

   - There are certain exceptions mentioned in the section where the provisions do not apply. These include cases where a search is initiated, assets are requisitioned, or information is received under specified circumstances.

6. Specified Authority:

   - The term "specified authority" refers to the authority mentioned in Section 151.

148A. The Assessing Officer shall, before issuing any notice under section 148,—

 (a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;

 (b) provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);

 (c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);

 (d) decide, on the basis of material available on record including 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 specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires.

FAVOURABLE ASPECTS FOR THE REVENUE:

• The section establishes a structured process that the AO must follow before issuing a notice for reopening assessments.
• It ensures that there is an inquiry and an opportunity for the assessee to be heard before any action is taken.
• The requirement for prior approval from the specified authority adds an additional layer of oversight and ensures a more cautious approach.
• The section includes exceptions to its applicability in certain situations, providing flexibility to the Income Tax Department to take swift action in specific cases, such as those involving search and seizure operations or information received under a notified scheme.

In summary, Section 148A sets out a procedural framework that balances the rights of the assessee with the need for the Income Tax Department to address cases of potential income escaping assessment in a fair and systematic manner.

COURT ORDERS:

1. Manas v. Income-tax Officer W.P. NO. 13473 OF 2023 (READ FULL CASE LAW)

This writ petition challenges the re-assessment proceedings under the Income-tax Act, 1961, for the assessment year 2019-2020. The petitioner claims a violation of natural justice due to an alleged failure to receive notices. The impugned order states that the notice was sent to an incorrect email address, 'yhoo' instead of 'yahoo.' However, the respondent argues that the notice was sent to the correct email address, 'jvgsurana@gmail.com,' as evidenced by a screenshot of the assessing officer's sent mail page.

The court finds the petitioner's arguments misconceived and mischievous, emphasizing the importance of providing accurate contact information to the Income-tax Department. It notes that confusion over multiple email addresses is not uncommon and stresses the need for both taxpayers and officials to address this issue.

The court dismisses the writ petition, deprecates the attempt to take advantage of a technical mistake, and imposes a penalty of Rupees One Lakh to be remitted to the Cancer Institute, Adyar, Chennai. The decision underscores the responsibility of assessees to provide accurate contact details and condemns attempts to exploit technical errors.

2. T.M. SubashThangam v. Income Tax Officer W.P. NO. 17952 OF 2023 (READ FULL CASE LAW)

The petitioner, an individual, seeks a mandamus to conduct an inquiry based on a representation dated 22.04.2023, considering a letter from Punjab National Bank dated 17.04.2023, and halt further proceedings related to Income Tax Act notices for the Financial Years 2017-2018 to 2020-2021. However, the court finds the prayer misconceived as the petitioner has already received notices and orders under Section 148A(b) and (d) for some years, and it's unclear if assessments have been completed. The petitioner sought clarification from the bank regarding transactions connected to his PAN number, and the bank's letter denies his connection to certain accounts.

The court emphasizes it cannot delve into factual aspects under Article 226 and notes that as the petitioner has received final orders and ongoing notices, cooperation with the Income Tax Department is necessary. The court rejects the mandamus prayer, dismissing the writ petition. The petitioner is instructed to respond to notices, cooperate with the department, and let the assessment proceedings continue in accordance with the law. No costs are awarded.

3. Vijaya Lakshmi & Co. Vs. The Assessment Unit &Ors. W.P.No.12343 of 2023. (READ FULL CASE LAW)

The petitioner, represented by Ms. Janane, claims that no notice was issued before the impugned order, alleging that all notices were sent to an unfamiliar email address, chelvanca224@rediffmail.com. However, the court notes a contradiction in the petitioner's affidavit, revealing that the mentioned email address was provided to the Income Tax Department by the petitioner for filing returns through Mr. Chelvan, a Chartered Accountant. The court rejects the petitioner's claim and dismisses the writ petition without further intervention. No costs are imposed, and connected miscellaneous petitions are also dismissed.

4. T.M. SubashThangam Vs. The Income Tax Officer &Ors. W.P.No.17952 of 2023 (READ FULL CASE LAW)

In Writ Petition No. 17952 of 2023, the petitioner, an individual, seeks a mandamus directing an inquiry based on their representation dated 22.04.2023, taking note of a letter from Punjab National Bank dated 17.04.2023, and dropping all further proceedings related to notices under the Income Tax Act for the Financial Years 2017-2018 to 2020-2021. The Senior Standing Counsel, Dr. Ramasamy, accepts notice for respondents R1 to R3 and is prepared for final disposal.

The court finds the petitioner's prayer to be misconceived, noting that the petitioner received notices under Section 148A(b) and an order under Section 148A(d) for certain years. It is unclear if these proceedings cover all the mentioned financial years. The petitioner sought clarification from the bank regarding transactions using their PAN number, and the bank's certificate states that the relevant accounts belong to another entity, KK Steels and Building materials.

The court emphasizes that factual aspects are not within its purview in Article 226 of the Constitution. The petitioner, having received final orders and ongoing notices, is urged to cooperate with the Department and participate in the proceedings. The court rejects the mandamus request, stating that representation holds no value in assessment matters, and the petitioner must respond to notices, appear before the officer, and provide explanations.

As a result, the court dismisses the Writ Petition, instructing the petitioner to cooperate with the Department, and the assessment proceedings will continue in accordance with the law. No costs are imposed.

5. ParasuramnSamyParasuPrabhakaran Vs. The Income Tax Officer &Ors. W.P.No.11140 of 2022 (READ FULL CASE LAW)

In Writ Petition No. 11140 of 2022, the petitioner challenges an assessment order dated 23.03.2022, asserting that the respondents determined a taxable income of Rs.2,70,51,019 and initiated penalty proceedings under various sections of the Income Tax Act. The petitioner claims to have submitted a certificate from their bank, Bank of Baroda, refuting the income mentioned in the notice. The respondents argue that the petitioner, a non-compliant assessee, failed to file income tax returns and did not respond to several notices. Despite producing a bank certificate, the respondents contend that it lacks genuineness, and the petitioner did not provide the requested bank statements.

The court acknowledges the petitioner's defense based on the bank certificate but notes the petitioner's non-compliance with filing returns and responding to notices. While recognizing the certificate, the court sets aside the impugned order and directs the respondents to reconsider the case on its merits. The petitioner is given 15 days to file a reply and must deposit Rs.5,00,000 within 60 days. Upon compliance, the respondents must issue a fresh order within 30 days. Failure to comply will result in automatic withdrawal of the relief granted. The Writ Petition is disposed of with these directions, and connected Miscellaneous Petitions are closed. No costs are imposed.

6. W.P.No.17347 of 2023 RamakrishnanJayanthi  Vs. The Income Tax Officer (READ FULL CASE LAW)

In W.P. No. 17347 of 2023, the petitioner challenges an order disposing of objections to a notice issued under Section 148A(b) of the Income Tax Act, 1961. The respondent's order, dated 21.03.2022, asserts that the petitioner failed to respond to the notice and concludes that income chargeable to tax has escaped assessment. The petitioner, a widow, claims that her son, VenuShrinivas, manages her Income Tax obligations and created a profile using his email ID (venushrinivas123@gmail.com) in December 2014. The petitioner argues that, despite filing returns for the previous assessment year with her son's email ID, the respondent sent notices to her personal email ID (JAYANTHI.RAMAKRISHNAN23@GMAIL.COM), causing confusion.

The court acknowledges the petitioner's lack of tech-savvy nature and dependence on her son. Following a query on the petitioner's profile, the court instructs the respondent to provide details on the profile's creation, modifications, and IP addresses. The respondent explains that notices were sent to the address in the master profile, but postal notices were returned. Citing precedent cases, the court notes a bona fide mistake on the petitioner's part and sets aside the impugned order. The case is remitted to the respondent to pass a fresh order within 60 days, with the petitioner given 15 days to file a reply. The court allows for the petitioner's unfamiliarity with technology and dependence on her son, emphasizing a need for leniency. The writ petition is allowed with these observations, and no costs are imposed. Connected miscellaneous petitions are closed.

PROBLEMS FACED BY REVENUE IN COURT:

1. The procedural amendments, specifically Section 148A, are binding, emphasizing that the Income Tax Department must follow the procedure outlined in Section 148A.
2. The court indicated that delegated legislation, such as the Notifications in question, cannot alter or postpone the implementation of a statutory provision. In this context, it implied that the Notifications could not have delayed the coming into force of Section 148A.
3. The Section 6 of the General Clauses Act did not support the Department's position. It suggested that the amended Section 148 (Old provision) did not continue to exist from April 1, 2021.
4. Sending of notices under section 148 instead of section 148A when the new provision has been enacted and the Ashish Agarwaljudgement has been enacted.
5. Not providing opportunity of hearing and natural justice.
6. Sending notices and orders in the wrong email ID and not serving it properly.
7. Non delivery - Late delivery of Notices and orders which does not reach the assesse.

NOTE & SOLUTION TO REVENUE:

1. Sending of notice and following procedure as per the law laid down in the Ashish Agarwal case.
2. Following procedure and sending notices as per the amended sections and noticing dates as per the judgement.
3. Provide enough opportunity to the assesse and giving opportunity to submit documents.
4. Making proper documentation of the same in orders passed by the department. Providing more details on the assesse’s actions and following of the dates as provided under the act and precedents.
5. Sending Notice as per the correct e-mail ID of the assesse and serving it to them in a timely manner. Better to deliver it through Speed Post and saving proof of the same which is very necessary as it causes the most problem in court.
6. Give enough time and opportunity before passing the orders and give assesse no chance to raise question in court and record all the opportunities in the order. Give enough reasoning for the assessment.

CONCLUSION:

In summary, Section 148A of the Income Tax Act establishes a systematic procedure for reopening assessments, ensuring fairness and due process. Recent court cases highlight challenges faced by the Income Tax Department, such as improper notice delivery and technical errors. To address these issues, the Department should focus on meticulous documentation, accurate communication, and compliance with amended provisions. Adopting secure communication channels and providing ample opportunities for assessee response will strengthen the Department's position. In essence, effective implementation of Section 148A requires a commitment to procedural diligence and adherence to principles of fairness and transparency.