M/S Chetak Enterprises LTD. vs. The Assistant Commissioner Of Income Tax

Facts

The petitioner, M/s Chetak Enterprises Ltd., filed its return of income for assessment year 2018-2019, and a regular assessment order was passed under Section 143(3) of the Income Tax Act, 1961, on July 15, 2021. Subsequently, a notice under Section 148A(b) was issued on March 10, 2022, proposing to reopen the assessment based on information received from search and survey actions conducted on M/s APCO Infratech Private Limited and its associates on September 15, 2021. The petitioner contended that all relevant information was disclosed during the original assessment. The respondent argued that the search revealed prima facie evidence of circular transactions and fake invoices between the petitioner and M/s APCO Infratech Private Limited, justifying the reopening. An order under Section 148A(d) was passed after considering the petitioner's reply, followed by a notice under Section 148.

Held

The Court held that the writ petition was premature and that the petitioner had not made out a case for interference at this stage. The Court relied on several precedents, including judgments from the Supreme Court (CIT v. Chhabil Dass Agarwal) and the Punjab and Haryana High Court (Sumit Passi vs. Assistant Commissioner of Income-Tax) and its own Division Bench decisions (Laxmi Meena vs. Union of India & Ors., Anshul Jain vs. Principal Commissioner of Income Tax). These judgments consistently held that when the Income Tax Act provides a complete machinery for assessment/reassessment, penalty, and relief, the High Court's jurisdiction under Article 226 should not be invoked prematurely. The Court noted that the petitioner was afforded an opportunity of hearing under Section 148A(b), submitted a detailed reply, and a detailed order under Section 148A(d) was passed. The Supreme Court's dismissal of an SLP against a similar High Court order (Anshul Jain) was also highlighted, emphasizing that grievances on merits should be agitated before the Assessing Officer in reassessment proceedings. Therefore, the Court dismissed the writ petition, granting liberty to the petitioner to raise all objections in subsequent stages after the issuance of notice under Section 148 and during the reassessment proceedings.

Key Issues

1. Whether the reopening of assessment for the assessment year 2018-2019, initiated by a notice under Section 148A(b) of the Income Tax Act, 1961, is illegal and without jurisdiction, given that a regular assessment order under Section 143(3) had already been passed. (Question of law) 2. Whether the information obtained from search and survey actions on a third party (M/s APCO Infratech Private Limited) can form the basis for reopening the assessment of the petitioner under Section 148A and 148 of the Act, especially when the petitioner claims all transactions were disclosed during the original assessment. (Question of mixed law and fact) Petitioner's arguments: The reopening is illegal and void ab initio because all relevant information, including transactions with M/s APCO Infratech Private Limited, was disclosed during the original scrutiny assessment. Merely conducting a search on a third party does not provide a legal basis for reopening the petitioner's assessment. Reliance was placed on the judgment in Micro Marbles Private Limited vs. Office of the Income Tax Officer Ward-1. Respondent's arguments: The search on M/s APCO Infratech Private Limited prima facie revealed circular transactions and fake invoices with the petitioner, indicating escaped income. An opportunity of hearing was provided, and a detailed order under Section 148A(d) was passed after considering the petitioner's reply, justifying the invocation of Section 148.