The High Court of Jharkhand dismissed an appeal filed for quashing and setting aside the notice issued by the respondent under Section 148 of the Income Tax Act, 1961 on the ground of being illegal and outside jurisdiction and is beyond the limitation prescribed under Section 149 of the Act. The court ruled that the Section 148 notice was valid, allowing the Assessing Officer to lawfully reopen the assessment for the assessment year 13–14 for ten years due to legislative amendments and undisclosed fraudulent loans.
Brief Facts:
The first petitioner is an individual and chartered accountant by profession and the second is a company that is engaged primarily in the construction and development of residential flats, commercial establishments, and schools. The dispute relates to the issuance of notice to the respective assesses issued under section 148 of the Act by the respondent. The basis for the issuance of the notices was stated to be search and seizure operations conducted on the business premises of the first petitioner and the second petitioner was only subjected to a survey under Section 133A. The petitioners have challenged the jurisdiction for issuance of notice under Section 148 of the Act.
Contentions of the Petitioner:
The learned counsel appearing on behalf of the petitioner contended that to lessen the burden of litigation and compliance, eliminate discretion, provide certainty, and encourage ease of doing business, the Finance Act, 2021 was introduced with the legislative intent to reduce the time limit in ordinary cases to three years and to increase the threshold amount of income having escaped assessment to Rs. 50 lakhs. It was further contended that extended time restriction of Section 149(1)(b) is not applicable because the accusation if it occurs at all, is based on information that does not lead to any income escaping assessment in the petitioners' respective forms of "ASSET” and the notice under Section 148 was sent after ten years, thus it is no longer valid.
Contentions of the Respondent:
The learned counsel appearing on behalf of the Respondent contended that Section 149 of the Act prescribes limitations to issuing a notice under Section 148 of the Act and with the amendment made by the Finance Act, 2021, though Section 153A is no longer applicable for making an assessment of income where a search has been conducted on or after 01.04.2021. He further relied upon explanation 2 of Section 148 of the Act which provides that where search and survey have been initiated after 01.04.2021; the assessing officer is deemed to have information that suggests that the income chargeable to tax has escaped assessment and contended that the notice issued under Section 148 of the Act in respect of both the petitioners is within the jurisdiction.
Observations of the court:
The court observed that starting on April 1, 2022, the legislature amended Section 149(1)(b) to include entries in books of account other than assets and expenditures, thereby broadening the scope for revenue in search procedures. According to the records, the department may have filed accusations regarding entries in the books of account. The assesse’s income return did not disclose the fraudulent loans of Rs. 93 lacs provided by the assesse’s CA. As a result, the Section 148 notice was properly issued. Section 153C grants the government the authority to commence an evaluation against a third party whose records were discovered during the search carried out on the property, following the guidelines outlined in Section 153A.
The court further observed that the assessing officer was correct to provide notice under 148 of the revised section for the assessment year 13–14 in the cases of both assesses because the search was carried out on June 9, which falls in the financial year 2022–23, which would be the assessment year 2023–24.
The court ruled that as the Assessing Officer had lawfully obtained prior approval from the appropriate authority, they were entitled to reopen the assessment for A.Y. 13–14 for ten years.
The decision of the Court:
The court dismissed the petition.
Case Title: Devika Construction and Developers Private Ltd. vs. Principal Chief Commissioner of Income Tax
Coram: Hon’ble Mr. Justice Rongon Mukhopadhyay, Hon’ble Mr. Justice Deepak Roshan
Case No.: W.P.(T) No. 2650 of 2023
Advocate for the Petitioner: Ms. Kavita Jha, Ms. Lavanya Gadodia
Advocate for the Respondent: Mr. R. N. Sahay, Mr. Anurag Vijay
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