Case Title: Rahul Sachan Vs. Income Tax Officer
Case No.: WRIT TAX No. – 799 of 2024
Order on: 15th May, 2024
Coram: Hon’ble Saumitra Dayal Singh J. & Hon’ble Donadi Ramesh, J.
Facts:
In this case, Rahul Sachan, the petitioner, challenged an order issued under Section 148A(d) of the Income Tax Act, 1961, along with a consequential notice for the Assessment Year 2020-21. The order was based on information suggesting that Rahul Sachan had engaged in transactions with a company involved in providing accommodation entries, implying tax evasion. Further, he responded to the notice, providing detailed explanations and evidence of legitimate transactions. However, the Assessing Authority relied oral statements and reports from unrelated proceedings, as well as the non-response of the company in question to notices and summonses. It was argued that the Assessing Authority failed to consider his objections adequately and passed the order in a non-speaking and perfunctory manner. Conversely, the revenue’s counsel contended that the amended statute did not require the strict test of ‘reason to believe’ and that the reassessment proceedings were justified based on available material. However, the court examined the provisions of Section 148A and emphasized that while the requirement to record ‘reasons to believe’ had been removed, the assessing authority still needed to consider relevant material and the assesses response before deciding whether it was a ‘fit case’ for reassessment. The court upheld the validity of the reassessment proceedings, provided they were conducted bona fide and based on the suggestion of income escaping assessment.
Issues framed by the Court:
- Whether the order passed under Section 148A(d) of the Income Tax Act, 1961, was valid.
- Whether the Assessing Authority adequately considered the objections raised by the petitioner before deciding to initiate reassessment proceedings.
- Whether the statutory amendments removing the requirement to record ‘reasons to believe’ necessitate a different standard for initiating re-assessment proceedings.
- Whether the Assessing Authority’s decision to reassess the petitioner was justified based on available material and the petitioner’s response.
Legal Provisions:
Section 148 of the Income Tax Act, 1961: It gives authority to the Assessing Officer to send notice to a taxpayer whose income has not been properly assessed.
Section 148A of the Income Tax Act, 1961: Empowers taxpayers to provide an explanation to the income tax department regarding any income that escaped assessment.
Contentions of the Appellant:
Rahul Sachan, herein the appellant raised several key arguments before the court. Primarily, he contended that the tax authority failed to adequately address his objections before initiating reassessment proceedings. Despite providing evidence to support the legitimacy of his transactions, the authority relied on unrelated statements and reports, without providing sufficient justification for its decision. Moreover, the appellant argued that while the tax law had changed to remove the requirement for specific reasons to initiate reassessment, the authority still needed to thoroughly consider all evidence before deciding. He emphasized that the authority’s decision should be based on a genuine evaluation of the situation, rather than being arbitrary or unjustified.
Contentions of the Respondent:
The respondent, herein, representing the Income Tax Authority, stated certain responses to the appellant’s claims. Primarily, they stated that the changes in tax law had eliminated the need for specific reasons to initiate reassessment, shifting towards a more subjective evaluation by the authority. They contended that the authority had duly considered the appellant’s objections and the evidence provided before deciding to proceed with reassessment. Further, they emphasized that sufficient material existed to justify the initiation of reassessment proceedings, including reports indicating potential tax evasion in transactions involving the appellant. They asserted that the authority’s decision was based on a subjective assessment of the available information and was within the bounds of the amended tax regulations.
Court’s Analysis and Judgement:
The Hon’ble Court specifically analysed the arguments presented by both the parties in this case. They recognized that while the requirement for specific reasons to initiate reassessment had been removed under the amended statute of tax law, the assessing authority is still required to consider all the relevant evidences before deciding. Further, it emphasized that the authority’s decision should be grounded in a genuine assessment of the situation and not be arbitrary. Eventually, the court upheld the validity of the reassessment proceedings, stating that as long as the assessing authority’s decision was not arbitrary and was based on the available information, detailed scrutiny of that decision was unnecessary. They concluded that the reassessment process was conducted within the bounds of the law and was justified given the circumstances surrounding the appellant’s transactions.
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Judgement Reviewed By- Shramana Sengupta
