Failure of AO to follow directions given by HC While issuing Notice u/s 148 Reopening Assessment invalidates Order, No Penalty: Bombay HC [Read Order]

The Bombay  High Court (HC) in a significant judgement has held that the failure of the Assessing Officer(AO) to follow directions given by the HC while issuing notice under section 148  of the Income Tax Act, 1961 to reopen the assessment invalidates the order and order demanding penalty and tax not valid.

The Sahebrao Deshmukh Co-op. Bank Ltd, the petitioner challenged the order passed under Section 148 of the Income Tax Act, 1961 (“the Act”), and the order rejecting the Petitioner’s objections to the reopening of the assessment, Assessment Order dated 31.03.2022, passed under Section 147 read with Section 143(3) of the Act, Notice of Demand, issued under Section 156 of the Act, and Penalty Notice dated 31.03.2022, issued under Section 271(1)(c) of the Act, issued by Respondent No.2.

The petitioner is a Co-operative Bank providing financial and banking services, and for that purpose, it is governed by the provisions of the Reserve Bank of India Act, 1934, and directions given by the Reserve Bank of India under that Act. Respondent No.2 issued a Notice dated 26.01.2022, under the provisions Section 142(1) of the Act, calling upon the Petitioner to furnish on or before 01.02.2022, the accounts and documents, details.

It was argued that the final order of assessment dated 31.03.2022 along with the notice of demand and penalty notices are issued without giving an opportunity of hearing to the Petitioner in the matter and all are passed contrary to the principles of natural justice.

The Petitioner received impugned assessment order dated 31.03.2022 reassessing its income for the assessment year 2013-14 claiming that an amount of Rs.2,00,00,000/- had escaped assessment and holding that the total taxable income of the Petitioner for that period was Rs.22,05,94,840/-. Along with the assessment order, the Petitioner was served with a notice of demand under Section 156, a Penalty notice under Section 244 of the Act, and a notice Under Section 274 read with Section 271(1)(c) of the Act respectively.

Inthe case of Tata Capital  Financial  Services  Limited v Assistant  Commissioner of Income Tax, the  Court has specifically directed that the standard form/request sent by the Assessing Officer for obtaining approval with the order of approval should be annexed to the communication regarding reasons for reassessment and that if the reasons refer to any other document or a letter or a report, such portions which were concerning the assessee should be reproduced in the notice; that a personal hearing shall be given and minimum seven working days advance notice of such personal hearing shall be granted.

Justice Dhiraj Singh Thakur and Justice Valmiki Sa Menezesobserved that the Assessing Officer had acted in complete contravention of the general directions issued by the Court in matters, where a notice under Section 148 of the Act, for the reopening of assessment, is issued by the revenue.

While allowing the petition the Court set aside the impugned orders and remanded the matter back to the Assessing Officer, who shall provide the Petitioner with the satisfaction note of the Principal Commissioner of Income Tax.

Support our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.