Section 148A(b): Disclosure of materials on which AO formed opinion

Udaan Hotels & Resorts Private Ltd. Vs Union of India & Ors. (Calcutta High Court)

The case of Udaan Hotels & Resorts Private Ltd. vs Union of India & Ors. has brought to light a significant question regarding the workings of the Income Tax Act, 1961. The primary concern: whether the materials upon which an opinion was formed by the Assessing Officer under Section 148A(b) need to be disclosed to the petitioner. This ruling has brought into focus the dynamics of full disclosure during the assessment process.

In this case, the petitioner, Udaan Hotels & Resorts Pvt Ltd., challenged the order passed by the Assessing Officer under Section 148A(d) of the Income Tax Act, 1961. The Revenue Authority was accused of reopening past assessments on the allegation of undisclosed income, with the petitioner relying on the safeguards provided by Section 148A(a), (b) & (c).

The Revenue Authority argued that they had followed the procedure as per the requirements under Section 148A(b) and 148A(c). However, the Calcutta High Court pointed out that there was no evidence to show that the information provided by Sri Kailash Kumar Patwari to the Revenue Authority had been disclosed to the petitioner.

The court further observed that the materials that formed the basis for the Assessing Officer’s opinion should be disclosed to the petitioner under the provisions of Section 148A(a), (b), and (c). This implies a requirement for transparency in the assessment process, ensuring that the assessee is made aware of all materials and information used in forming the assessment.

Conclusion: The Udaan Hotels & Resorts Private Ltd. vs Union of India & Ors. case underscores the importance of disclosure in income tax proceedings. The Calcutta High Court’s ruling confirms that under Section 148A(b), materials that influenced the Assessing Officer’s decision should be disclosed to the petitioner. This case serves as a milestone for tax assessment practices, emphasizing the principles of transparency and fairness in tax assessments.

FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT

In the writ petition order passed by the Assessing Officer under Section 148A(d) of the Income Tax Act, 1961 (hereinafter referred to as the “said Act”) as well as the proceeding which has been initiated under Section 148A is under challenge.

During course of hearing, the learned advocate representing the petitioner has drawn attention of this Court to the notice dated 30th March, 2023 issued under Section 148A(b) of the said Act of 1961.

The grievance of the petitioner which has been ventilated in the writ petition is by issuing order dated 19^th April, 2023 under Section 148A(d) of the said Act of 1961 the Revenue Authorities have entered into an arena of Section 148 whereby past assessment has been reopened on the allegation that certain income of the petitioner being assessee was found to be chargeable was not disclosed at the material point of time as a result whereof the said income of the assessee had escaped the assessment. While attacking the order passed under Section 148A(d) reliance has been placed on the safeguards provided by the statute under Section 148A(a), (b) & (c).

In addition thereto petitioner has also relied upon a department circular dated 1^st August, 2022 wherein it has been provided that before issuing an order under Section 148A(d) an enquiry is required to be carried out.

Mr. Mazumdar, learned Deputy Solicitor General has defended the steps taken by the Revenue Authority and also has relied upon the order passed by the concerned Revenue Authority under Section 148A(d) and it has been demonstrated before this Court that elaborate exercise has been made by the concerned Assessing Officer before issuance of the said impugned order dated 19^th April, 2023. According to the Revenue Authority the procedure which is required to be followed under Section 148A(b) and under Section 148A(c) has been complied with.

On perusal of reply of the petitioner dated 17t^h April, 2023 to the show cause notice, it appears that petitioner has specifically requested the Assessing Officer to supply the copies of statements of Sri. Kailash Kumar Patwari based on which the concerned Assessing Officer decided to initiate proceeding under Section 148A and final order has been passed under Section 148A(d).

Today there is nothing on record which goes to show that the information which has been provided by said Kailash Kumar Patwari to the concerned Revenue Authority has been disclosed to the petitioner by the Assessing Officer and it has also been submitted on behalf of the Revenue Authority that there are certain materials based on which there has been formation of opinion by the concerned Revenue Authority that a portion of the income of the petitioner remained unassessed. It appears to this Court that materials based on which opinion was formed by the Assessing Officer needs to be disclosed to the petitioner in contemplation of the provisions as provided under Section 148A(a), (b) and (c),

In view of aforesaid scenario this Court though permits the Revenue Authority to conclude the proceeding under Section 148 but not to pass final order without the express leave of this Court.

Let affidavit-in-opposition to this writ petition be filed within three weeks from date, affidavit-in-reply if any thereto, be filed within one week thereafter.

Parties shall be at liberty to mention the matter before the next available Circuit for hearing after the time fixed hereinabove for exchanging the affidavits.

The parties shall act on the basis of the server copy of the order downloaded from the Official Website of this Court.