*Assessing Officer Failed to Record the Reason for issue of Notice u/s 148: Chhattisgarh HC quashes Notice

Clipped from: https://www.taxscan.in/assessing-officer-failed-to-record-the-reason-for-issue-of-notice-u-s-148-chhattisgarh-hc-quashes-notice/166616/?utm_source=izooto&utm_medium=push_notifications&utm_campaign=Assessing%20Officer


By Jwala K.P – On April 6, 2022 2:17 pm

Assessing Officer - Record - Reason - notice u s 148 - quashes notice - Chhattisgarh high court - Taxscan

The High Court of Chhattisgarh has held that Assessing Officer failed to record the reason for issue of notice u/s 148 and quashes notice.

The petitioner, Hariom Ingots and Power Pvt. Ltd. is a private limited company and engaged in the business of manufacturing and sales of M.S. Ingots and Re-Rolled Products. During Assessment Year 2014-15, petitioner’s company had issued 25,000 shares in the name of Amarnath Agrawal and Smt. Ramadevi Agrawal at face value of Rs.100/- per share. The sale of share has been disclosed in their return. After receiving notice under Section 142(1) of the I.T. Act, petitioner has submitted clearly that due to losses suffered by Steel Industry and no buyers in the market, company was facing paucity of funds and therefore, shares have been allotted on its face value. After considering the reply to notice, final assessment order under Section 143(3) of the I.T. Act has been passed. Aggrieved by issuance of notice under Section 148 of the Income Tax Act, 1961, the petitioner has filed writ petition before Honorable High Court. The petitioner submitted that notice issued under Section 148 of the I.T. Act is after lapse of 4 years and once petitioner has disclosed all the transactions, particularly, sale of share and also explained the authority the reason for transferring of share on the face value, which was accepted by Assessing Officer, there was no ground available for the respondents to issue notice under Section 148 of the I.T. Act as there was no failure on the part of assessee to make return and disclosing all the material facts fully and truly. He further submits that notice issued under Section 148 of the I.T. Act is also not sustainable because, the reason assigned for issuance of notice is transfer of shares, attracts provision of Section 56(2) (vii) (c)(ii) of the I.T. Act. He contended that the provision relied for forming reason to belief is for the ‘Individual and Hindu undivided Family’. Petitioner is a company. As there was no valid reason/ground for issuance of notice under Section 148 of the I.T. Act, notice issued to the petitioner/company is quashed.

The Honorable High Court has observed that Section 56 mentions about the income from other sources. Section 56(vii) talks about the income received by an individual or a Hindu undivided family in any previous year. Petitioner is a company and in view of specific provision under Section 56(2) (vii) of the I.T. Act, relied by the Assessing Officer for issuance of notice will not be applicable to the petitioner who is a company. For issuance of notice under Section 148 of the I.T. Act, there should be tangible material and mandatory compliance of Section 147 of I.T. Act. Proceedings of reassessment has been initiated against company after lapse of 4 years of submission of return, which is not in dispute. Under first proviso to Section 147 of the I.T. Act, for starting the reassessment proceedings after lapse of 4 years, Assessing Officer has to record his conclusion that there was failure on the part of assessee in not disclosing fully and truly all material facts necessary for assessment of that particular assessment year, which is not appearing from the reading of the Annexure i.e. reasons for issuance of notice.

The single bench of Honorable justice Sri Parth Prateem Sahu has held that “considering the aforementioned facts and circumstances of the case, reason assigned for issuance of notice and provisions mentioned therein, in the opinion of this Court, there was no reason/ground available with Assessing Officer to issue notice under Section 148 of the I.T. Act. Issuance of notice under Section 148 of the I.T. Act to petitioner is not in accordance with the first proviso to Section 147 of the I.T. Act, therefore, it is not sustainable, which is liable to be quashed and it is hereby quashed”.To Read the full text of the Order CLICK HERE

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