Naresh Balchandrarao Shinde Vs ITO (Bombay High Court – Nagpur Bench)
The Bombay High Court allowed the writ petition challenging the order dated 31.03.2022 passed under Section 148A(d) of the Income-tax Act, 1961 and the consequential notice issued under Section 148 for Assessment Year 2015-16.
The petitioner, an individual assessee, was issued a notice under Section 148A(b) on 23.03.2022 alleging that income chargeable to tax had escaped assessment. The notice referred to three transactions: purchase of immovable property worth ₹40,00,000, cash deposits of ₹20,71,500, and cash deposits of ₹16,20,000. The petitioner was required to respond by 29.03.2022.
In response, the petitioner submitted that he had not purchased the immovable property. He produced a registered sale deed dated 03.02.2015 showing that the property had been purchased by his daughter, who was separately assessed to income tax, while he had acted only as her special power of attorney holder. He further denied depositing ₹16,20,000 in his bank account and sought disclosure of the source of information relating to that alleged deposit. According to the petitioner, after excluding the property transaction and the disputed cash deposit, the amount allegedly representing escaped income was only ₹20,71,500, which was below the ₹50 lakh threshold prescribed under Section 149(1)(b) for reopening beyond three years.
The Assessing Officer rejected the explanation and passed an order under Section 148A(d), recording satisfaction that income of ₹76,91,500 had likely escaped assessment and proposing issuance of notice under Section 148.
Before the High Court, the petitioner contended that the Assessing Officer had ignored the registered sale deed despite it being produced during the proceedings. It was submitted that the property belonged to the petitioner’s daughter and not to the petitioner. The petitioner also argued that the source of information regarding the alleged cash deposit of ₹16,20,000 had never been disclosed despite a specific request. Since the amount allegedly escaping assessment would fall below ₹50 lakh after excluding the property transaction, reopening beyond three years was barred under Section 149(1)(b).
The Revenue opposed the writ petition, submitting that the petitioner had an alternate remedy in the reassessment proceedings and that the reopening was based on information flagged on the departmental Insight Portal.
The High Court observed that although the notice under Section 148A(b) granted less than the seven days contemplated under Section 148A(b), the petitioner had nevertheless filed a detailed reply along with the registered sale deed. On examining the sale deed, the Court found that it clearly established that the petitioner was not the purchaser of the property and that his daughter had purchased it after availing a housing loan. The petitioner was merely described as her special power of attorney holder. The Court held that despite this undisputed documentary evidence being placed before the Assessing Officer, it had not been considered while passing the order under Section 148A(d), demonstrating lack of application of a judicious mind. Accordingly, the amount of ₹40,00,000 relating to the property transaction was liable to be excluded.
With regard to the alleged cash deposit of ₹16,20,000, the Court noted that the petitioner had sought disclosure of the material or source of information forming the basis of the allegation, but no such material had been supplied.
The Court held that after excluding the ₹40,00,000 property transaction, the remaining amount allegedly escaping assessment was ₹36,91,500, comprising ₹20,71,500 and ₹16,20,000. Since this amount was below the threshold of ₹50,00,000 prescribed under Section 149(1)(b), the notice issued on 23.03.2022 for Assessment Year 2015-16, being beyond three years, could not be sustained.
The High Court observed that requiring the petitioner to undergo reassessment proceedings despite the undisputed documentary evidence would be futile. Holding that the reopening failed to satisfy the requirements of Section 149(1)(b), the Court quashed and set aside the order dated 31.03.2022 passed under Section 148A(d) as well as the notice issued under Section 148. The Revenue was, however, left free to take appropriate steps in accordance with law.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
