Income Tax Act | Alternate Remedy Available, Orders Are Appealable, Writ Jurisdiction Need Not Be Invoked, Allahabad High Court

The Allahabad High Court has refused to quash order and consequential notice under Sections 147 and 148 of the Income Tax Act, 1961 in writ proceedings under Article 226 of the Constitution of India. The Court held that all permissible grounds of defence remain open to assessee at the stage of proceedings under Section 148.

The bench comprising Chief Justice Pritinker Diwaker and Justice Ashutosh Srivastava stated that order under Section 148A(d) of the Act is not final adjudication on escapement of assessment of income of assesee. The. Court observed that the Income Tax Act was framed to exclude determination of correctness of information at the stage of proceedings under Section 148A owing to existence of alternate remedy/appeal under Section 246-A.

Factual Background

Petitioner was issued notice under Section 148A(b). Subsequently, Assessing Officer passed order under 148A(d) and issued consequent notice under Section 148 of the Income Tax Act. Petitioner filed return of income declaring total income of Rs.12,69,380/-

An intimation was issued the petitioner for completion of assessment under Section 144-B. Various notices under Section 142(1) of the Act were also issued which were duly replied by the petitioner annexing all documents including copy of assessment order under Section 143(1), contract note of purchase and sale. However, order under Section 147 read with Section 144-B of the Income Tax Act, 1961 was passed and demand notice was issued which were challenged before the Court along with the notice under Section 148 of the Act.

Counsel for petitioner contended that the petitioner is squarely covered by the first proviso to Section 147 of the Act as it stood prior to the amendment by the Finance Act, 2021 as there was no allegation of escapement of income for initiating reassessment proceedings after expiry of four years from the relevant Assessment Year i.e. 31.03.2020.

Relying on the decision of Supreme Court in Commissioner of Income Tax, Delhi Vs. Kelvinator of India Ltd. and Allahabad High Court decision in Awlish Kumar Singh Vs. Union of India, it was argued that reassessment proceedings cannot be initiated based on change of opinion and to review already concluded assessment. Further, jurisdiction of the authority passing the order was challenged on the ground that ingredients of Section 149(1)(b) were not complied with by the Assessing Officer.

Per Contra, Counsel for Revenue argued that reply of the petitioner was duly considered while passing the order under Section 147. Replying on the decision of Allahabad High Court in Deepak Kumar Yadav Vs. Principal Commissioner of Income Tax and another, it was argued that consideration at the stage of passing order under Section 148A(d) is limited to ascertainment of information with the assessing officer that income of assessee has escaped assessment to tax. Petitioner could challenge the final order passed under Section 147 as the question whether income of assessee has actually escaped assessment is decided after issuance of notice under Section 148.

High Court Verdict:

The Court observed that reply filed by the petitioner was considered and found unsatisfactory in the order passed under Section 147 of the Act. The Court noted that it was evident from the order that the Revenue had information “which strongly suggests that the income chargeable to tax has escaped assessment for Assessment Year 2015-16”, which was the reason for consequential proceedings under Section 148 of the Act.

Elucidating the legislative purpose for not introducing further enquiry at the stage of Section 148A(d), the Court observed that:

“Under the scheme of the Act a detailed procedure has been provided under Section 148 for issuance of notice whereafter the assessing authority has to determine, in the manner specified, whether income has escaped assessment and the defence of assessee, on all permissible grounds, remains open to be pressed at such stage. The ultimate determination made by the assessing authority under Section 147 for reassessment is otherwise subject to appeal under Section 246-A of the Act.”

Further, the Court held that scope of decision under Section 148A(d) of the Act is limited to existence or otherwise of information suggesting income chargeable to tax has escaped assessment.

“ Merits of the information referable to Section 148A thus remains subject to the reassessment proceedings initiated vide notice under Section 148 of the Act. It is for this reason that issues which require determination at the stage of reassessment proceedings and in respect of which departmental remedy is otherwise available are not required to be determined at the stage of decision by the assessing authority under Section 149A(d).”

Relying on the decision of Apex Court in Anshul Jain Vs. Principal Commissioner, Income Tax, the Court held that order under Section 148A(d) and consequent notice under Section 148 cannot be interfered with under Article 226 of the Constitution of India as any order passed in the proceedings pursuant to notice under Section 148 is appealable under Section 246-A of the Act.

Accordingly, the writ petition was dismissed.

Case Title: Vivek Saran Agarwal vs. Union Of India And 3 Others [WRIT TAX No. - 968 of 2023]

Case Citation: 2023 LiveLaw (AB) 376

Click Here To Read/Download Order