Case Law Analysis on Income Escaping Assessment – Section 147 | Section 148

Table of Contents

1. General [Section 147]
2. Non-disclosure of Primary Facts [Section 147]
3. Notice for Reassessment [Section 148]

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1. General [Section 147]

1.1 Audit Opinion/Objection

Evaluation of law and its bearing on assessment must be directly and solely done by Assessing Officer; opinion of audit on a question/evaluation of law cannot be basis for reopening [Assessment years 2008-09 and 2009-10] [In favour of assessee]

Mobis India Ltd. v. Dy. CIT [2022] 145 taxmann.com 131/[2023] 450 ITR 60 (Mad.)

Comptroller and Auditor General is not Authority conferred with jurisdiction to make an assessment which falls within exclusive jurisdiction/domain of the Assessing Officer. Any attempt by an external agency other than Assessing Officers would amount to entrenchment on powers of assessment/reassessment vested exclusively under statute on Assessing Officer. It clearly amounts to transgression and usurping powers vested with assessing authority by a body/unit not vested with power of assessment/reassessment which is impermissible. The evaluation of law and its bearing on assessment must be directly and solely done by the Assessing Officer. The audit party can furnish information which leads the Assessing Officer to realise need for reassessment, however, information/material provided by audit or any external agency cannot be realisation. The expression of opinion or evaluation of law and its bearing on assessment by audit is in excess of its jurisdiction and, thus, opinion of audit on a question/evaluation of law would not, rather cannot be basis for reopening.

Where Assessing Officer had no subjective satisfaction while issuing notice of reopening and reopening was essentially on audit party opinion and not on basis of his own conviction, reopening of assessment was not justified [Assessment year 2017-18] [In favour of assessee]

Adani Power Maharashtra Ltd. v. Asstt. CIT [2023] 147 taxmann.com 583/454 ITR 720 (Guj.)

The assessee was a limited company which had filed its return of income for assessment year 2017-18 declaring total loss. On scrutiny, assessment order under section 143(3) was passed accepting the returned total loss of the assessee, without making any addition or disallowance of any expenses.

Thereafter, the assessee received a notice under section 148, asking it to file return of income for assessment year 2017-18. The assessee, without prejudice, filed the return of income in compliance with the notice and sought for the reasons recorded for reopening and approval obtained under section 151.

The assessee had been provided with the copy of the reasons and approval. In response to the same, the objections were raised challenging validity of notice which were disposed of by revenue.

On writ petition, the assessee challenged the impugned notice issued under section 148 on ground that the reopening was on the basis of the audit party objection.

Held that an audit party is entitled to point out factual error or omission in assessment. However, mere opinion of audit party cannot form basis for the Assessing Officer to reopen closed assessment. Since the Assessing Officer had no subjective satisfaction while issuing notice of reopening and reopening on part of the Assessing Officer was essentially on audit party opinion and not on basis of his own conviction, reopening of assessment was not justified.

1.2 Change of Opinion

Where there was no information before Assessing Officer regarding shareholding pattern of PGIIPL or its accumulated profits, it could not be said that assessee disclosed all necessary materials for assessment in this regard, therefore, reopening of assessment to consider assessee’s liability under section 2(22)(e), could not be said to be a case of change of opinion [Assessment years 1998-99 and 1999-2000] [In favour of revenue]

Aswani Enterprises v. Asstt. CIT [2018] 100 taxmann.com 178/[2019] 417 ITR 223 (Mad.)

After completing assessment, the Assessing Officer received a letter from the Assessing Officer of one PGIIPL stating that the PGIIPL had given advances to assessee-firm in which two of its shareholders had substantial interest.

On the basis of the said letter, the Assessing Officer of assessee reopened assessment to consider applicability of section 2(22)(e). The assessee challenged reopening contending that it was a case of change of opinion as said advances had been disclosed in the financial statements.

Held that when there was no information before the Assessing Officer regarding the shareholding pattern of PGIIPL or its accumulated profits, it could not be said that the assessee has disclosed all the necessary materials for assessment in this regard, and, therefore, reopening of assessment was not a case of change of opinion.

Case review: SLP dismissed in Aswani Enterprises v. Asstt. CIT [2023] 153 taxmann.com 378/294 Taxman 435/456 ITR 33 (SC).

Where at time of original assessment under section 143, specific queries were raised by Assessing Officer which were duly answered by assessee-company and thereafter assessment order was passed, it was not open for revenue to reopen assessment on same issue on mere change of opinion [Assessment year 2010-11] [In favour of assessee]

Financial Software and Systems (P.) Ltd. v. Dy./Asstt. CIT [2022] 145 taxamann.com 36 (Mad.)

Where at time of original assessment under section 143, specific queries were raised by the Assessing Officer which were answered by the assessee and thereafter an assessment order was passed under section 143(3), it was not open for revenue to reopen assessment proceedings on same issue and, thus, impugned reassessment proceedings initiated on mere change of opinion was to be set aside.

Case Review: SLP dismissed in Dy./Asstt. CIT v. Financial Software and Systems (P.) Ltd.[2022] 145 taxmann.com 37/447 ITR 370 (SC).

Where all facts or material had been disclosed by assessee during original assessment and entire basis for re-opening after expiry of four years from end of relevant assessment year was due to mistake of Assessing Officer that resulted in under assessment, reopening of assessment being on change of opinion, was impermissible in law [Assessment year 2012-13] [In favour of assessee]

CEAT Ltd. v. Asstt. CIT [2023] 146 taxmann.com 107/291 Taxman 366 (Bom.)

Where revenue had miserably failed to point out any facts or material which had not been disclosed by the assessee during original assessment and entire basis for re-opening after expiry of four years from end of relevant assessment year was due to mistake of the Assessing Officer that resulted in under assessment, reopening of assessment being on change of opinion was impermissible in law.

Case Review: SLP dismissed in Asstt. CIT v. CEAT Ltd. [2023] 146 taxmann.com 108/291 Taxman 435/[2022] 449 ITR 171 (SC).

1.3 Rectification

During pendency of proceedings under section 154, it was not permissible for revenue to initiate reassessment proceedings under section 147/148 [Assessment year 1995-96] [In favour of assessee]

S. M. Overseas (P.) Ltd. v. CIT [2022] 145 taxmann.com 375/[2023] 291 Taxman 441/450 ITR 1 (SC)

The assessee claimed the benefit under section 80HHC for the assessment year 1995-96. However, in the subsequent assessment year, the assessee claimed the bad debt on the ground that, in the earlier year, the export was not materialized and therefore, the proceedings under section 154 were initiated by the revenue. During the pendency of the said proceedings, the revenue also initiated the proceedings under section 147/148 and reopened the assessment for assessment year 1996-97. The Assessing Officer passed the Assessment Order.

The assessment proceedings reopened under section 148 were quashed and set aside by Tribunal by holding that as the proceedings under section 154 initiated against the assessee were pending, no re-opening proceedings under section 147/148 could have been issued/initiated. On appeal, the High Court, by the impugned judgment and order, allowed the said appeal preferred by the revenue and remanded the matter to the Tribunal by observing that as the proceedings under section 154 were beyond the period of limitation prescribed under section 154(7), the said notice was invalid and therefore, the reopening proceedings under section 147/148 would be maintainable.

Held that the High Court has committed serious error in observing and holding that the notice under section 154 was invalid as the same was beyond the period of limitation as prescribed/provided under section 154(7). The proceedings under section 154 were not the subject-matter before the High Court. Nothing was on record that, in fact, the notice under section 154 was withdrawn on the ground that the same was beyond the period of limitation prescribed under section 154(7). In the absence of any specific order of withdrawal of the proceedings under section 154, the proceedings initiated under section 154 can be said to have been pending.

In that view of the matter, during the pendency of the proceedings under section 154, it was not permissible on the part of the revenue to initiate the proceedings under section 147/148 pending the proceedings under section 154. The High Court has erred in presuming and observing that the proceedings under section 154 were invalid because the same were beyond the period of limitation.

Case review: CIT v. S. M. Overseas (P.) Ltd. [2012] 20 taxmann.com 613/[2011] 335 ITR 281 (Punj. & Har.) set aside.

2. Non-disclosure of Primary Facts [Section 147]

2.1 General

One specific assertion that material facts are detected in scrutiny and survey proceedings would satisfy requirement of an allegation of failure to truly and fully disclose material facts as contemplated under first proviso to section 147 where assessment is to be reopened after four years [Assessment year 2013-14] [In favour of revenue]

Stumpp Schuele & Somappa (P.) Ltd. v. Asstt. CIT [2023] 152 taxmann.com 447 (Kar.)

Assessment is to be reopened after four years as contemplated under first proviso to section 147 [as it stood in the relevant time], there should be allegations of failure to truly and fully disclose material facts unless other conditions are satisfied. The specific assertion that material facts are detected in scrutiny and survey proceedings would satisfy requirement of an allegation.

2.2 Reason to Believe

Where original proceeding was completed under section 143(1), it was not necessary for Assessing Officer to come across some fresh tangible material to form a belief that income by way of professional services charges had escaped assessment so as to initiate reassessment proceedings and doctrine of change of opinion would not arise, thus, impugned reopening was justified [Assessment year 2018-19] [In favour of revenue]

Ernst & Young U.S. LLP v. Asstt. CIT (International Taxation) [2023] 146 taxmann.com 64/[2022] 449 ITR 425 (Delhi)

Assessment in case of the assessee was completed under section 143(1). Subsequently, the Assessing Officer issued a reopening notice under section 148A(b) upon assessee on ground that income by way of professional services charges from a party was not offered to tax. He further passed a reassessment order under section 148A(d) making additions an account of same to income of the assessee. The assessee contended that revenue in the assessee’s own case in subsequent assessment year 2019-20 had accepted assessee’s claim that said income was not taxable under article 15 of relevant DTAA and, therefore, during relevant assessment year also similar view was to be taken. He further contended that there was no new concrete material to form belief that income had escaped assessment so as to initiate reopening.

Held that order passed under section 143(1) was not an assessment for purpose of section 147, therefore, when original proceeding had been completed under section 143(1), it was not necessary for Assessing Officer to come across some fresh tangible material to form a belief that income had escaped assessment and doctrine of change of opinion did not arise. Further, since assessee did not place on record any documents such as contract agreement, copy of original invoices (not just invoice breakup) to show that service rendered in instant assessment year were similar/identical to service rendered in subsequent assessment year 2019-20, reassessment proceedings was justified.

Where AO on basis of search conducted at premises of ‘A’ reopened assessment of assessee, however no proceedings were initiated against assessee under section 153C and Assessing Officer did not record his satisfaction with regard to escapement of income, impugned reassessment proceeding was not sustainable [Assessment years 2005-06 to
2007-08] [In favour of assessee]

Sri Dinakara Suvarna v. Dy. CIT [2022] 143 taxmann.com 362/[2023] 454 ITR 21 (Kar.)

During search conducted at premises of ‘A’, a diary was seized which contained details of payment made by ‘A’ to the assessee. Later on, survey was conducted in the assessee’s premises and he agreed to offer additional receipts as income but did not file his revised return. Thereafter, Assessing Officer initiated proceedings under section 147.

Held that Assessing Officer on basis of search conducted at premises of A reopened assessment of the assessee, since no proceedings were initiated against the assessee under section 153C and Assessing Officer did not record his satisfaction with regard to escapement of income, impugned reassessment order was not sustainable.

Case review: SLP dismissed in Dy. CIT v. Sri Dinakara Suvarna [2023] 151 taxmann.com 489/293 Taxman 687/454 ITR 27 (SC).

2.3 Disclosure only Before Criminal Investigation Wing

Criminal investigation wing is separate and distinct from assessment wing and disclosure made before criminal investigation wing will not exonerate assessee from requirement of making a ‘full and true disclosure’ before Assessing Officer in assessment and thus, where assessee did not furnish information including bank statements relating to cash deposits in excess of Rs. 2 lakhs during assessment proceedings, assumption of jurisdiction by assessing authority under section 147 beyond period of four years was not barred by limitation [Assessment year 2011-12] [In favour of revenue]

RKR. Gold (P.) Ltd. v. Asstt. CIT [2023] 146 taxmann.com 239 (Mad.)

Pursuant to filing of return by the assessee, case was taken up for scrutiny and notice under section 143(2) was issued by assessing authority. Parallelly and separately, another notice was issued by ITO, Intelligence and Criminal Investigation wing (ICI), calling upon assessee to furnish information under section 133(6) including bank statements relating to cash deposits in excess of Rs. 2 lakhs. Thereafter, order of assessment came to be passed by the Assessing Officer. Post finalisation of assessment, department had received information regarding suspicious bank transactions and, proceedings for reassessment had been initiated.

Held that it was found that communications/responses of the assessee during original assessment did not reveal existence of said bank account and, thus, communications addressed to assessing authority on one hand and ITO (ICI) on other, would itself illustrate difference in disclosures made before two authorities. The criminal investigation wing being separate and distinct from assessment wing, disclosure made before one wing would not exonerate assessee from requirement of making ‘full and true disclosure’ before the Assessing Officer in assessment. On facts, assumption of jurisdiction by the Assessing Officer under section 147 beyond period of four years was not barred by limitation, in absence of full and true disclosure by the assessee at first instance.

2.4 Writ Jurisdiction

Where assessee filed a writ petition challenging reassessment order passed against it on ground of not following mandatory requirement of disposing of objections raised by assessee against notice issued under section 148, since assessee had already availed an alternative remedy by way of filling an appeal against said order, writ petition could not be entertained as assessee could not ride on two horses simultaneously [Assessment year 2014-15] [In favour of revenue]

Indo Colchem Ltd. v. Dy. CIT [2023] 149 taxmann.com 30/292 Taxman 156 (Guj.)

Original assessment by way of scrutiny assessment under section 143(3) was completed in case of the assessee. After four years, the assessee received a notice for reassessment on two issues; firstly, TDS on freight expenses and; secondly, disallowance of excise duty expense claimed in profit and loss account. The assessee raised certain objections against reopening of assessment. However, reassessment proceeding was completed and a notice of demand under section 156 was raised. The assessee filed an appeal against said reassessment order to save his statutory right. It also filed writ petition against reassessment order on grounds of non-following of mandatory requirement of disposing of objections raised by it against reopening of assessment.

Held that since the assessee had already availed alternative remedy by way of statutory appeal alongside filing of instant writ petition, writ petition could not be entertained as assessee could not ride on two horses simultaneously.

3. Notice for Reassessment [Section 148]

3.1 Jurisdictional Assessing Officer

Where Assistant Commissioner, Mumbai who recorded reasons for reopening assessment in case of assessee had no jurisdiction over assessee to issue notice under section 148(1), continuation of such reassessment proceedings by jurisdictional Assistant Commissioner without issuing any fresh notice under section 148 was invalid [Assessment year
2011-12] [In favour of assessee]

Charu K. Bagadia v. Asstt. CIT [2023] 146 taxmann.com 345/[2022] 448 ITR 563 (Mad.)

The appellant was an assessee on the file of the second respondent (Assistant Commissioner – Chennai). She filed her return for assessment year 2011-12 which was processed by the Assessing Officer under section 143(1). After a period of five years, she received a notice issued by the first respondent (Assistant Commissioner-Mumbai) under section 148 purportedly to reassess the income of return submitted by her for the assessment year 2011-12. In response, she submitted a reply dated 26-4-2018 stating that the first respondent has no jurisdiction to issue such a notice under section 148 and therefore, she requested to drop the reassessment proceedings. Subsequently, the first respondent transferred the files pertaining to the appellant to the second respondent. Thereafter, the second respondent continued the reassessment proceedings by issuing a notice under section 143(2) read with section 129, directing the appellant to appear and file return of income to the notice under section 148 along with supportive documents. The appellant preferred writ petition to quash both the notices issued by the respective respondents 1 and 2. The Judge, having observed that the notice initially issued by the first respondent against the appellant though improper, need not be set aside, in view of the fact that the said proceedings were subsequently transferred to the Income-tax Authorities at Chennai; the commencement of the proceedings by issuing notice under section 143(2) was in no way prejudiced the appellant; and she was at liberty to file her objections and avail an opportunity of hearing to be provided under the Act, dismissed the said writ petition.

Held that the legal proposition laid down in various decisions to is that ‘notice under section 148 is mandatory to reopen/reassess the income of the assessee and such a notice should have been issued by the competent Assessing Officer, who has jurisdiction’; ‘The jurisdictional Assessing Officer, who records the reasons for reopening the assessment as contemplated under sub-section (2) of section 148, has to issue notice under section 148(1), then only, such a notice issued under section 148(1) would be a valid notice’; ‘The officer recording the reasons under section 148(2) and the officer issuing notice under section 148(1) has to be the same person’; ‘Section 129 is applicable when in the same jurisdiction, there is a change of incumbent and one Assessing Officer is succeeded by another’; and ‘once the initiation of reassessment proceedings is held to be invalid, whatever follows thereafter must also, necessarily be invalid’.

Admittedly, the appellant was an assessee on the file of the second respondent and hence, the first respondent has no jurisdiction over the appellant to issue notice under section 148 for reopening the assessment for the relevant assessment year, after recording the reasons to believe that some of the income of the appellant had escaped assessment. The notice issued by the first respondent under section 148, without jurisdiction, lacked legal sanctity and hence, the same was invalid. As a sequitur, the continuation of the reassessment proceedings by the second respondent, who was the jurisdictional Assessing Officer, without issuing any fresh notice as contemplated under section 148, but issuing notice under section 143(2) read with section 129, which applies only for change in incumbent within the same jurisdiction, was also invalid.

3.2 Information which Suggests that Income Chargeable to Tax has Escaped Assessment [Explanation 1 to Section 148]

An audit objection can constitute information on basis of which re-assessment proceeding can be initiated [In favour of assessee]

Subodh Agarwal v. State of U.P. [2023] 149 taxmann.com 448 (All.)

A search was carried out at the premises of the petitioner on 31-8-2015. A show cause notice was issued on 1-6-2016 under section 153A of the Act for block assessment. The order of assessment was passed on 31-12-2017, which was challenged by the petitioner as well as the Department before the Tribunal. The appeal filed by the petitioner was accepted whereas the one filed by the Department was dismissed. The order was further challenged by the Department by filing an appeal before High Court, which was dismissed vide order dated 12-12-2022. After passing of the order under section 153A, during pendency of the appeal against the aforesaid order, a show cause notice was issued to the petitioner on 28-3-2022 under section 148A(b), which was duly replied to by the petitioner. Rejecting the objection raised by the petitioner, order was passed on 24-4-2022 granting sanction for initiation of proceedings against the petitioner under section 148A(d) and consequently, a notice was also issued on 24-4-2022. On writ petition, the petitioner prayed for quashing of notice dated 28-3-2022 issued under section 148A(b), notice dated 24-4-2022 issued under section 148 and order dated 24-4-2022 passed by the Assessing Officer, rejecting the objections raised by the petitioner against issuance of notice under section 148A(b). Further prayer had been made for dropping the reassessment proceedings initiated in pursuance of notice under section 148(1).

Held that the scheme of the Act for reassessment has undergone a change with effect from 1-4-2021. Substantial changes have been made in the provisions providing for reassessment with effect from 1-4-2021. Section 147, which initially provided for reopening of assessment ‘for reasons to believe’ was amended. It now provides that if any income chargeable to tax has escaped assessment, the Assessing Officer may assess or reassess such income or recompute the loss. The exercise of power is subject to sections 148 to 153. Before passing an order under section 147, the Assessing Officer is required to serve the assessee a notice along with copy of the order passed under clause (d) of section 148A, requiring him to file the return. First proviso of section 148 provides that no notice under this section shall be issued unless there is information with the Assessing Officer which suggests that income chargeable to tax has escaped assessment. The prerequisite is only availability of information, suggesting that income has escaped assessment. Such an exercise of power has to be with prior approval of the specified authority. In Explanation 1 to the aforesaid section, meaning of words ‘information with the Assessing Officer which suggests that income chargeable to tax has escaped assessment’, has been defined. It includes objection raised by the CAG to the effect that assessment for the relevant assessment year has not been made in accordance with the provisions of the Act. The aforesaid provision has undergone a change vide Finance Act, 2022 with effect from 1-4-2022. Clause (ii) of Explanation 1, now contain words ‘any audit objection’ instead of the words ‘any final objection raised by the CAG’. The condition is information in the form of audit objection to the effect that assessment has not been framed in accordance with the provisions of the Act. Newly added section 148A provides that the Assessing Officer before issuing notice under section 148 shall conduct enquiry, if required, with prior approval of the specified authority with respect to the information which suggests that income chargeable to tax has escaped assessment. Clause (b) thereof provides that an opportunity of hearing is to be afforded to the assessee to show cause as to why notice under section 148 be not issued on the basis of information which suggests that income chargeable to tax has escaped assessment. Reply of the assessee, if any, is to be considered and an order is required to be passed in terms of section 148(d). Second proviso to the aforesaid section provides eventualities in which the scheme will not apply. Newly added section 148B which was added with effect from 1-4-2021 by Finance Act, 2021 provides that no order of assessment or reassessment or recomputation shall be passed by an Officer below the rank of Joint Commissioner, to which clauses (i) to (iv) of Explanation 2 to section 148 apply except with prior approval of Additional Commissioner or Additional Director or Joint Commissioner or Joint Director.

In the case in hand, notice under section 148 has been issued on the basis of an audit objection to the effect that assessment has not been made in accordance with the provisions of the Act. This constitutes information which is sufficient to initiate proceedings under sections 147 and 148. After the substantial amendments carried out in the Act, it now provides that the proceedings can be initiated in case where income chargeable to tax has escaped assessment. Proviso to section 148 provides that before issuing such notice, the Assessing Officer should have information which suggests that the income chargeable to tax has escaped assessment. In terms of clause (ii) of Explanation 1, meaning has been assigned to the term information suggesting that income chargeable to tax has escaped assessment to include even an audit objection. In the case in hand as well, notice under section 148 has been issued on the basis of an audit objection giving complete details as to how the income chargeable to tax has escaped assessment. Merely because in some of the show cause notices issued to the petitioner during the course of assessment proceedings after search, a brief reference was made to some information, which was not finally dealt with, will not absolve or will not come to the rescue of the assessee to claim that the issue has already been considered. It is for this reason that the audit objection was raised. In the present case, a perusal of the notice shows that it was issued on the basis of an audit objection. There were cash transactions to the tune of Rs. 156.45 crores. During course of assessment, the source and genuineness of the transaction was not asked for. These, having remained unexplained, were required to be treated as income of assessee under section 68. It may have tax effect to the tune of Rs. 64.34 crores. Details of the cash transactions were also annexed with the reasons. It was on the basis of various messages recovered from the mobile phone of the petitioner, which was seized during raid. In terms of aforesaid text messages, the amount was to be delivered to different persons on being identified by showing currency notes bearing particular numbers. The illegal activities of the petitioner were found to be in the nature of providing accommodation entries through stage managed sham sale and purchase of penny stocks. Aforesaid notice was replied to by the petitioner vide his letter dated 15-4-2022 after seeking adjournments. The plea raised was that all the texts and the information which was available with the Department was examined in detail at the time of framing assessment under section 153A, hence, there was no scope for issuing any notice under section 148. There was no fresh material available. Aforesaid reply was supplemented by another reply vide letter dated 19-4-2022. It was stated that after the search the phone of the petitioner was also seized and the messages were extracted therefrom. The chats and messages were thoroughly examined and on the basis of same, additions were made in the case of KOPL, wherein a sum of Rs. 1.51 crores was surrendered. Also on the basis of the said material, the assessments of other group assessees were framed. The contents of the information as such was not disputed by the petitioner. After considering the objections filed by the petitioner in terms of section 148A(c), order was passed under section 148A(d) and a notice under section 148 was issued calling upon the petitioner to file his return on the prescribed form for the assessment year 2015-16. It is the aforesaid show cause notice which is under challenge in the present petition. The order under section 148A(d) as annexed with the aforesaid notice specifically refers to the audit objection as the information on the basis of which proceedings were initiated. The information is specific. From the information it was evident that the petitioner was indulging in Hawala activities/transactions. It was specifically mentioned that the material as referred to in the audit objection was not considered at the time of initial assessment. The petitioner had not explained the entries as put to him in the show cause notice issued under section 148A(b). His reply was based only on technicalities. The unverified and unexplained transactions are to the tune of Rs. 156.45 crores.

As far as assessment of the petitioner framed under section 153A is concerned, in the appeal filed against the order, Commissioner (Appeals) has upheld the order of assessment. Appeal filed before the Tribunal was al- lowed vide order dated 7-10-2021 on the ground that there was violation of provisions of section 153D with reference to prior approval of Additional Commissioner before passing the order of assessment. The opinion of the Tribunal was that the process of granting mechanical approval under section 153D vitiated the entire proceedings. The Department filed appeal against the aforesaid order before this Court, which was dismissed on 12-12-2022, upholding the order passed by the Tribunal on the ground that approval of draft assessment order by the Competent Authority was without application of mind. Second proviso to section 153A will not come to the rescue of the petitioner for the reason that in terms thereof assessment or re-assessment pending for the assessment years in question on the date of initiation of search under section 132 or making requisition under section 132A shall abate. Admittedly, in the case in hand present reassessment proceedings were not pending on the date when search was carried out at the premises of the petitioner. Notice in the case in hand for initiating reassessment proceeding was issued on 24-4-2022 whereas search was carried out on 31-8-2015. As to whether an audit objection can constitute information on the basis of which re-assessment proceeding can be initiated, reference can be made to Explanation 1, clause (ii) to second proviso of section 148. The aforesaid provision clearly provides that any audit objection to the effect that assessment in case of assessee for the relevant assessment year has not been made in accordance with the provisions of the Act is included in the term ‘information regarding escaped assessment’. In the case in hand, it is not a matter of dispute that there is an audit objection raised that the assessment of assessee has not been framed properly in accordance with the provisions of the Act. It is a case where petitioner was indulging in providing accommodation entries. The text messages recovered from his mobile phone clearly corroborated the modus operandi adopted by the petitioner. The amount involved is to the tune of Rs. 156.45 crores. Merely because at one stage the Assessing Officer had answered to the queries raised by the Auditor regarding the assessment being in accordance with the provisions of the Act and there being no illegality therein, will not mean that the information in the form of audit objection could not be relied upon to opine that the income chargeable to tax had escaped assessment. Existence or non-existence of information can be subject matter of litigation but not the sufficiency thereof. As far as the argument raised by the petitioner that after assessment had been framed under section 153A there was application of mind and examination of record at different levels in the Department as the assessment order is passed with approval of the higher authorities, there was no scope for initiation of fresh proceedings for reassessment under section 148, it is opined that, even this argument is also to be noticed and rejected. In support of the argument no provision of law as such has been cited except second proviso of section 153A, in terms of which only pending proceeding abate. In the case in hand, it is undisputed case on record that the order of assessment passed in case of the petitioner under section 153A was set aside only on the ground that there was no application of mind by the higher authorities for granting approval under section 153D. And the issue raised by the Audit has not been examined at the time of assessment after search. It is the settled position of law that prima facie availability of material is sufficient for reopening of the reassessment proceedings and the sufficiency and correctness of the material is not to be considered at that stage. The present case cannot be said to be a case of change of opinion for the reason that there is no finding recorded in the earlier assessment order passed under section 153A, which was set aside on technical ground of non-approval of the competent authority in terms of section 153D. For the reasons mentioned above, there is no merit in the present petition. The same is, accordingly, dismissed.

3.3 Issuance of Notice

3.3.1 Validity Period of Notice

A notice of reopening which is once issued would remain in operation unless it is specifically withdrawn, quashed or gets time barred [Assessment year 2010-11] [In favour of assessee]

Marwadi Shares & Finance Ltd. v. Dy. CIT [2018] 94 taxmann.com 398/407 ITR 49 (Guj.)

A notice of reopening which is once issued would remain in operation unless it is specifically withdrawn, quashed or gets time barred. Where the first notice of reopening of assessment was not withdrawn, it was not permissible in law to issue fresh notice of reopening. Since in terms of CBDT Circular No. 17/2019 dated 8-8-2019 amount of tax involved was low, impugned order could not be interfered with.

Case review: SLP dismissed in Dy. CIT v. Marwadi Shares & Finance Ltd. [2023] 154 taxmann.com 371/294 Taxman 600 (SC).

3.3.2 Duties of Assessing Officer

Where notice under section 148 was issued to assessee on basis of search conducted against a third party, Assessing Officer was duty bound to issue, along with notice under section 148, reasons which formed basis for reopening of assessment, satisfaction note and order of Principal Commissioner who granted approval to issuance of said notice along with note of Assessing Officer in support of his request for approval [Assessment year 2013-14] [Matter remanded]

Sahebrao Deshmukh Co-op. Bank Ltd. v. Asstt. CIT [2023] 149 taxmann. com 248/292 Taxman 258/452 ITR 92 (Bom.)

The petitioner was a co-operative bank, governed by the provisions of the Reserve Bank of India Act, 1934 and the directions issued thereunder, providing financial and banking services. The Assessing Officer issued notice dated 31-3-2021, under section 148 to the petitioner, claiming that it had reason to believe that the petitioner’s income chargeable to tax for the relevant assessment year 2013-14 had escaped assessment and he was called upon to file a return in the prescribed form within 30 days from the service of the notice. The notice also claimed that it was being issued after obtaining necessary satisfaction of the Principal Commissioner.

Thereafter, the Assessing Officer issued a notice under the provisions section 142(1), calling upon the petitioner to furnish the accounts and documents, details of which were provided in an annexure to the said notice. The peti- tioner replied to notice issued under section 142(1), and with reference to notice under section 148, requested the Assessing Officer to furnish copy of the reasons for believing that the income chargeable to tax had escaped assessment; in the said reply, it also stated that the petitioner-co-op. bank had filed its regular return of income under section 143(1), and assessment order had come to be passed thereon. On the same date, the petitioner also filed its return of income. The Assessing Officer provided reasons to the petitioner with the information sought, wherein it alleged that based upon survey conducted under section 133A carried out at the premises of one ‘V’, unaccounted cash was seized from that premises and from a statements on oath recorded under section 131, from the said ‘V’, it came to be revealed that the petitioner was involved in accommodation entry business and charging commission at the rate of 2.75% of the transaction or accommodation entry provided. After receiving this information, the petitioner-co-op. bank, requested the Assessing Officer to provide it with the satisfaction note of the Principal Commissioner, who had accorded approval to the reopening of the assessment. In its reply, it had also sought a copy of the appraisal report on the basis of which, reopening of assessment was ordered. There was no reply forthcoming from the Assessing Officer to this letter, nor was the petitioner provided with the approval of the Principal Commissioner or appraisal report.

Thereafter, the Assessing Officer fixed a hearing of the matter, without providing the documents demanded by the petitioner. The petitioner once again reiterated its request for the appraisal report and specifically took objection to proceed with the matter without providing these documents and requested for a virtual hearing through video conferencing before any orders for assessment would be passed. However, time and again request of petitioner was denied and it ultimately received impugned assessment order, along with a notice of demand issued under section 156 and penalty notice issued under section 271(1)(c).

Held that the Assessing Officer appears to have acted in complete contraven- tion of the general directions issued by this Court in matters, where a notice under section 148, for reopening of assessment is issued by the revenue. To begin with, the Assessing Officer was duty bound to issue, along with the notice under section 148, the reasons which formed the basis for reopening of assessment, the satisfaction note and order of the Principal Commissioner of Income Tax, who granted approval to issuance of the said notice along with the note of the Assessing Officer in support of his request for approval, the appraisal report from the DDIT (Inv) Bhavnagar, and the statements of person recorded under section 131 in the search and seizure of the premises of SG, which were referred to in the notice. None of these documents, were sent to the petitioner in compliance with the general directions issued by this Court. It is also borne from the record that despite several requests from the petitioner, specifically demanding a copy of all these documents, the Assessing Officer has refused to furnish copies of the same to the petitioner. Thereafter, the Assessing Officer has, by order, rejected the request of the petitioner for furnishing all these documents without assigning any reasons for such rejection nor dealing with the specific objections and the request made by the petitioner in its order. In fact, the said order is diametrically opposed to the specific observations of this Court in Tata Capital Financial Services Ltd v. Asstt. CIT [2022] 137 taxmann.com 315/287 Taxman 1/443 ITR 127 (Bom.) Thereafter, despite a specific request for a personal hearing by the petitioner before passing the assessment order, the Assessing Officer has neither granted the same nor order dated 15-2-2022 dealt with the request and has gone ahead and passed the assessment order on 31-3-2022, without hearing to the petitioner. This arbitrary act of the Assessing Officer is also contrary to the specific directions of this Court contained in Tata Capital Financial Services Ltd. (supra), wherein Assessing Officers have been directed to give a personal hearing to assessees with a minimum seven working days advance notice of such personal hearing.

Considering all the above circumstances and applying the ratio of the above judgment, and specific directions contained therein to the revenue, it is opined that the Assessing Officer has acted in gross violation of the directions of the above judgment, and in contravention of the provisions of article 14 of the Constitution of India. Consequently, the impugned orders issued under section 148, order rejecting the objections to reopening passed by the respondent No. 2, assessment order dated 31-3-2022, notice of demand dated 31-3-2022 issued under section 156, and penalty notice dated 31-3- 2022 issued under section 271(1)(c), are quashed and set aside. Thus, the matter is now remanded back to the Assessing Officer, who shall provide the petitioner with the satisfaction note of the Principal Commissioner of Income Tax, granting approval for issuance of notice under section 148, the appraisal report from DDIT (Inv), and bank statements of SG, the statement of person recorded under section 131, and all other documents and material, which form the basis of the reasons recorded by the Assessing Officer for issuing notice under section 148. After furnishing all these documents to the petitioner, the Assessing Officer shall comply with the specific directions laid down by this Court in Tata Capital Financial Services Ltd. (supra), and after giving an opportunity of hearing to the petitioner, shall proceed to pass its orders.

3.4 Speaking Order

Where assessee had filed reply against reasons for reopening of its assessment, impugned assessment order passed under section 143(3) read with section 147 without disposing off said reply by passing a speaking order was unjustified and same was to be set aside [Assessment year 2011-12] [In favour of assessee]

Hewlett Packard Financial Services (India) (P.) Ltd. v. Dy. CIT [2023] 152 taxmann.com 559/294 Taxman 25 (Kar.)

Mandatory procedure of disposal of objections against reasons for reopening by Assessing Officer not having been followed, order of assessment cannot be sustained. The assessee had filed reply against reasons for reopening of its assessment, impugned assessment order passed under section 143(3) read with section 147 without disposing off said reply by passing a speaking order was unjustified and same was to be set aside.