Case Law Details
Satish Thourani Vs Union of India (Chhattisgarh High Court)
Summary: The Chhattisgarh High Court held that where the Assessing Officer obtains prior approval under Section 148A(a) of the Income Tax Act, 1961 to conduct an inquiry, he cannot bypass that inquiry and directly issue a notice under Section 148A(b). In the present case, the annexure to the notice under Section 148A(b) recorded that approval had been granted by the Chief Commissioner of Income Tax, Raipur on 14.02.2024 for conducting an inquiry. However, without conducting any inquiry, the Assessing Officer issued the notice under Section 148A(b), passed an order under Section 148A(d), and issued a notice under Section 148. The Revenue contended that the writ petition was premature as the reassessment proceedings were only at a preliminary stage. The High Court held that Section 148A prescribes a sequential statutory procedure and, having obtained approval to conduct an inquiry, the Assessing Officer could not omit that step. Accordingly, the Court allowed the writ petition, quashed the notice under Section 148A(b), the order under Section 148A(d), and the notice under Section 148, and remitted the matter to the Assessing Officer to first conduct an inquiry under Section 148A(a) and thereafter proceed in accordance with law.
Where the Assessing Officer obtains approval to conduct an inquiry under section 148A(a), he cannot bypass that mandatory inquiry and directly issue a notice under section 148A(b); such reassessment proceedings are liable to be quashed.
Core Issue: Whether an Assessing Officer, after obtaining prior approval of the specified authority to conduct an inquiry under section 148A(a), can validly issue a notice under section 148A(b) without first conducting such inquiry, and whether the consequential order under section 148A(d) and notice under section 148 are sustainable in law.
Facts: The Assessing Officer issued a notice under section 148A(b) dated 15.02.2024 alleging escapement of income. The annexure to the notice specifically recorded that the Chief Commissioner of Income Tax, Raipur, had granted approval under section 148A(a) on 14.02.2024 to conduct an inquiry into the information suggesting escapement of income. However, without conducting any inquiry pursuant to such approval, the Assessing Officer directly issued the show-cause notice under section 148A(b), thereafter passed an order under section 148A(d), and finally issued a notice under section 148. The petitioner challenged the entire reassessment proceedings contending that the statutory procedure prescribed under section 148A had not been followed.
Finding of the Assessing Officer: The Assessing Officer proceeded on the basis of information suggesting escapement of income and, despite obtaining prior approval for conducting an inquiry under section 148A(a), omitted to conduct any inquiry and directly initiated proceedings under section 148A(b), ultimately passing an order under section 148A(d) and issuing notice under section 148.
Finding of the Revenue: The Revenue contended that the writ petition was premature since only preliminary reassessment proceedings had been initiated and the assessee would have adequate opportunity to explain his case before the Assessing Officer. It was argued that the validity of the proceedings should not be examined at this stage.
Finding of the High Court: The High Court held that section 148A contemplates a sequential statutory procedure. Where the Assessing Officer considers it necessary to conduct an inquiry and obtains prior approval of the specified authority under section 148A(a), such inquiry cannot be dispensed with. The expression “results of enquiry conducted, if any” in section 148A(b) must be read in the context of the facts of each case. In the present case, the Assessing Officer himself sought and obtained approval for conducting an inquiry, thereby acknowledging that an inquiry was required. Having done so, he could not bypass that mandatory stage and directly issue a notice under section 148A(b). Since no inquiry was conducted despite the approval obtained, the notice under section 148A(b) was held to be illegal, rendering the consequential order under section 148A(d) and the notice under section 148 unsustainable in law.
Outcome: The Chhattisgarh High Court allowed the writ petition, quashed the notice issued under section 148A(b), the order passed under section 148A(d), and the notice issued under section 148, and remitted the matter to the Assessing Officer with a direction to first conduct an inquiry under section 148A(a) in accordance with law and thereafter proceed afresh in accordance with the statutory procedure.
FULL TEXT OF THE JUDGMENT/ORDER OF CHHATTISGARH HIGH COURT
1. The petitioner has assailed a notice issued under Section 148A(b) of the Income Tax Act, 1961 (for short “Act, 1961”) dated 15.02.2024.
2. Learned counsel for the petitioner would refer Section 148A of Act of 1961. He would contend that the Assessing Officer while exercising power under Section 148A(a), if he is desirous to conduct any inquiry, he has to accord prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment. He would contend that after completion of inquiry notice under Section 148 A(b) of the Act of 1961 can be issued. He would invite attention of this Court to para 3 of Annexure appended to notice, which states that ‘in order to conduct inquiry in the case in respect of transactions made as above, necessary approval has been accorded by CCIT, Raipur u/s 148A(a) of the IT Act on 14.02.2024.’ He would submit that as approval was granted by the superior authority i.e. CCIT, Raipur and the next step available to the Assessment Officer was to conduct an inquiry under the provisions of Section 148A(a) of the Act of 1961. He would contend that as no inquiry was conducted, and therefore, the notice issued under Section 148A(b) of Act of 1961 and consequential orders are not competent. He would submit that pursuant to notice issued under Section 148A(b) of the Act of 1961 the Assessment Officer has passed an order under Section 148A(d) of Act of 1961 and further issued notice under Section 148 of Act of 1961. He would pray to quash all the notices as well as the orders issued by the authority concerned.
3. On the other hand, Mr. Ajay Kumrani, Advocate appearing for respondents No. 2 to 4 would oppose. He would submit that the petition is premature as notice under Section 148A(b) of the Act of 1961 has been issued as the Assessment Officer has to conclude preliminary assessment proceedings. He would submit that the petitioner would get sufficient opportunity to defend his case before the respondent authorities. He would submit that petition is misconceived and deserves to be dismissed.
4. Mr. Abhishek Banjare would support the contention made by Mr. Ajay Kumarani.
5. I have heard learned counsel for the parties and perused the documents placed on record.
6. Section 148A(a) & (b) of Income Tax Act, 1961 read as under :-
“148A. Conducting inquiry, providing opportunity before issue of notice under section 148. – 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, with the prior approval of specified authority, 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);”
7. Bare reading of provision quoted-above would make it clear that the Assessing Officer before issuing notice under Section 148 of Act of 1961 may conduct an inquiry after obtaining prior approval of specified authority, if required, and thereafter, may provide an opportunity of hearing to the assessee and notice in this regard may be issued according to the provisions of Section 148A(b) of the Act of 1961.
8. In the present case, notice under Section 148A(b) of Act of 1961 was issued to the petitioner on 15.02.2024. Clause 3 of Annexure appended to show-cause notice would make it clear that the intention of Assessment Officer was to conduct an inquiry, and therefore, approval from the specified authority was obtained on 14.02.2024. It appears that without conducting any inquiry under the provisions of Section 148A(a) of the Act, 1961, the Assessment Officer issued notice under Section 148A(b) of Act of 1961 and concluded preliminary proceedings and passed an order under Section 148A(d) of Act of 1961 and also issued notice under Section 148. As the Assessment Officer failed to conduct inquiry despite obtaining approval of specified authority, the issuance of notice under Section 148A(b) of Act of 1961 was illegal and bad in law, and therefore, the subsequent proceedings and preliminary order passed under Section 148A(d) of Act of 1961 and notice issued under provisions of IT Act are not sustainable in the eyes of law, accordingly, quashed. The matter is remitted back to the Assessing Officer to conduct an inquiry according to the provisions of Section 148A(a) of the Act of 1961, and thereafter, proceed with the matter in accordance with law.
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