Collection Of Relevant Or Tangible Material Required For Opening Section 148A Proceedings: Rajasthan High Court

The Rajasthan High Court has held that the authority is required to reach satisfaction that income chargeable to tax has escaped assessment but in cases where three years have elapsed from the end of the relevant assessment year, the order under Section 148A for issuance of notice could be passed if there were no statutory impediment as contained in Section 149(1)(b) of the Income Tax Act. The division bench of Justice Manindra Mohan Shrivastav and Justice Shubha Mehta has observed that the department failed to place before the Court any material to suggest that the income exceeding Rs. 50,00,000 chargeable to tax has escaped assessment, which would warrant issuance of an order under Section 148A(d) followed by issuance of a notice under Section 148 of the Income Tax Act. On the basis of certain information, the respondent/department issued a notice under Section 148A(b) of the Income Tax Act, implying that income chargeable to tax for the assessment year 2015-2016 had escaped assessment within the meaning of Section 147 of the Act. The notice was sent along with the details of the cash deposits in the account of the assessee maintained with the Corporation Bank, which according to the notice disclosed a deposit of a total amount of Rs.52,75,000. The notice stated that the assessee did not disclose the amount of cash deposit during the relevant financial year and, therefore, on that basis, the proceedings are required to be initiated. The petitioner/assessesse stated that the initiation of proceedings on the basis that the cash deposits during the relevant financial year were Rs. 52,75,000 is factually incorrect. The total amount of cash deposited in his bank account in the Corporation Bank was only Rs.19,39,000. The assessee, in order to satisfy the authorities that the total cash deposits in that particular financial year were only Rs.19,39,000. The competent authority, however, proceeded to pass an order for the issuance of notice under Section 148 of the Act on 29.03.2022. Following that, a notice under Section 148 was issued to the assessee. The order passed under Section 149A(d) as well as the notice under Section 148 have been assailed. The assessee contended that in order to initiate proceedings under Section 148, the law requires the authority to first arrive at satisfaction after holding an enquiry in terms of provisions contained in Section 148A of the Act based on material available on record which must suggest that income chargeable to tax has escaped assessment. If the exercise is carried out after three years with reference to the relevant assessment year, proceedings under Section 148 of the Act may be initiated only if the total amount of the alleged income which is said to have escaped assessment exceeds Rs.50,000; otherwise, such an exercise may not lead to proceedings under Section 148A of the Act due to a statutory impediment under Section 149(1)(b). The petitioner contended that the entire material, which has been collected by the authorities, does not contain any material to even remotely suggest that the total income, which according to them escaped assessment, was more than Rs.50,00,000. On conjecture that the assessee may have some more bank accounts, an order has been passed under Section 148A (d) followed by a notice under Section 148 of the Act. Therefore, the order and proceedings are liable to be set aside. The department contended that the account in which undisclosed cash deposits of more than Rs. 19,00,000 were made itself suggests that the assessee, who is otherwise an NRI, may have many more bank accounts. He would submit that such an inference, taken together with the cash deposit details disclosed during the enquiry, by itself, is sufficient to validate the impugned order and the issuance of notice under Section 148. The court noted that only on the basis that the cash deposits of Rs. 19,39,000 chargeable to tax have escaped assessment, without anything more, the authorities were not justified in jumping to the conclusion that the assessee may have more bank accounts. "If such an interpretation is placed on the provision of Section 148A (d) of the Act with reference to the expression "material available on record", then in that case, it will open floodgates and even without the availability of any material, the authorities would be initiating proceedings under Section 148 of the Act, which will completely frustrate the object of the incorporation of Section 148A into the Act. It is a well-settled principle of interpretation that the taxing statute is required to be construed strictly. The interpretation as has been suggested by the learned counsel for the revenue cannot be placed upon the expression 'material available on record' to include the possibility of collection of any relevant or tangible material for the opening of proceedings under Section 148A of the Act," the court ...

Collection Of Relevant Or Tangible Material Required For Opening Section 148A Proceedings: Rajasthan High Court

Mariya Paliwala

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