High Court laid down principles for conducting proceedings under Sections 148A and 148

1.     As previous approval of PCIT dated 12.03.2022 was obtained before issue of notice under section 148A(b) dated 15.03.2022 based on “information” and notice gives material particulars to facilitate show cause by assessee, Assessing Officer justified in passing order under section 148A(d) and issuing reassessment notice under section 148 on 26.03.2022 when assessee neither filed reply rebutting the information within the statutory minimum 7 days (till 22.03.022) allowed by the notice nor filed request within 7 days asking for extension of time,.

 

2.   No interference is called for by High Court in writ petition especially when assessee surrendered to Assessing Officer’s jurisdiction by filing a return in response to section 148 notice.

 

3.      Principles laid down by Hon’ble Cuttack High Court as regards proceedings under sections 148A and 148 for guidance of Assessing Officer and assessee:

 

·   Notice under section 148A(b) asking assessee to show cause why reassessment notice should not be issued, should be based on "information"

·     The connotation of “information” in the context of reopening of assessment (in the context of state VAT Act) has been laid down by the Supreme Court [Larsen & Toubro Limited v. State of Jharkhand (2017) 103 VST 1: 79 267 (SC)] as follows:

 

“The expression ‘information’ means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or having a bearing on the assessment. A mere change of opinion or having second thoughts about it by the competent authority on the same set of facts and materials on the record does not constitute ‘information’. The word “information” used in the aforesaid Section is of the widest amplitude and should not be construed narrowly. It comprehends not only variety of factors including information from external sources of any kind but also the discovery of new facts or information available in the record of assessment not previously noticed or investigated Suppose a mistake in the original order of assessment is not discovered by the Assessing Officer, on further scrutiny, if it came to the notice of another assessor or even by a subordinate or a superior officer, it would be considered as information disclosed to the incumbent officer. If the mistake itself is not extraneous to the record and the informant gathered the information from the record, the immediate source of information to the Officer in such circumstances is in one sense extraneous to the record. It will be information in his possession within the meaning of Section 19 of the State Act. In such cases of obvious mistakes apparent on the face of the record of assessment, that record itself can be a source of information, if that information leads to a discovery or belief that there has been an escape of assessment or underassessment or wrong assessment.

Assessment proceedings can be reopened if the audit objection points out the factual information already available in the records and that it was overlooked or not taken into consideration. Similarly, if audit points out some information or facts available outside the record or any arithmetical mistake, assessment can be re-opened.

The expression ‘information’ means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or after bearing on the assessment.”

 

4.   Where notice under section 148A(b) clearly states that information has been gathered that assessee has suppressed income with bogus purchases from a party with particular PAN in the context of GST ITC fraud and asking assessee to show cause as to why reassessment notice under section 148A(b) should not be issued , it is clear that notice is based on “information” and material particulars have been furnished facilitating filing of show cause by assessee.

5.    Where notice under section 148A(b) gives statutory minimum 7 days to reply and assessee does not apply within 7 days for extension of time to reply, Assessee cannot later on complain after passing of order under section 148A(d) and issuance of section 148 notice that less time was given to respond to notice.

 

6.    As previous approval of PCIT dated 12.03.2022 was obtained before issue of notice under section 148A(b) dated 15.03.2022 based on “information” and notice gives material particulars to facilitate show cause by assessee , Assessing Officer justified in passing order under section 148A(d) and issuing reassessment notice under section 148 on 26.03.2022 when assessee neither filed reply rebutting the information within the statutory minimum 7 days (till 22.03.022) allowed by the notice nor filed request within 7 days asking for extension of time,. No interference is called for by High Court in writ petition especially when assessee surrendered to Assessing Officer’s jurisdiction by filing a return in response to section 148 notice.

 

7.    Since the petitioner has already filed revised return for the Assessment year 2018-19 in compliance of the terms of notice under Section 148,

(a) the Assessing Officer is required to verify the books of account of the relevant year examine any other evidence adduced by the petitioner with reference to the materials available in record.
(b) While doing so, he will confront the adverse material, if any, he wishes to utilize against the assessee-petitioner and record a preliminary statement with regard to verification.
(c) He may also record statement whether the alleged transactions are incorporated in the regular books of account/statements on the basis of which returns have already been filed.
(d) After such verification, if he comes to the conclusion that the petitioner is liable to be levied with tax, he shall allow the petitioner to take copy of such materials which he wants to utilize against the petitioner. 

(e) Needless to say that the petitioner shall be allowed reasonable opportunity   for stating its case, which shall be considered by the Officer in the order of assessment.

(f) The petitioner-assessee for the purpose of assessment may participate the proceeding initiated under Section 148 of the Income Tax Act and unnecessary adjournment shall be granted.

 

8.    Therefore, it cannot be said that the assessing officer has committed any error in insisting upon production of books of account before issuing the certified copy of the seized materials. Production of books of account prior to issuance of certified copy of the seized materials is necessary to rule out the possibility of preparation of accounts in line with the seized documents. This has become further necessary in this case as at no stage books of account were produced earlier at the time of inspection or before the assessing officer. However, we make it clear that where in course of inspection the inspecting officer seizes incriminating materials as well as regular books of account from the business premises of a dealer, the assessing officer or the inspecting officer shall supply copies of the seized regular books of account and incriminating material(s) to the dealer if he asks for the same before asking the dealer for furnishing his explanation in connection with any proceeding under the OVAT Act.

 

9.    On the reasoning afore-stated and with the above observations and directions, the writ petition is disposed of. (Related Assessment Year : 2018-19) - [Auroglobal Comtrade (P) Ltd. v. Chairman, Central Board of Direct Taxes (2022) 120 (Orissa)]