HC Quashes Sec. 148A(d) Order as AO Didn’t State Why Submissions Filed by Assessee Were Not Acceptable

Case Details: Shell Gas BV v. Assistant Commissioner of Income-tax, International Taxation - [2024] 164 taxmann.com 555 (Gujarat)

Judiciary and Counsel Details

• Bhargav D. Karia & Niral R. Mehta, JJ.
• Ms. S.N. Soparkar, Sr. Adv. & B.S. Soparkar for the Petitioner.
• Varun K. Patel for the Respondent.

Facts of the Case

During the year under consideration, the assessee advanced an interest-free ECB loan to its Indian subsidiary. It did not file a return of income, assuming no taxable income in India.

The Assessing Officer (AO) issued a notice under section 148(b) alleging escapement of income on the issue of non-charging interest to the Indian subsidiary. The assessee filed a detailed response to the notice. Subsequently, the AO passed an order under section 148A(d), and consequential notice under section 148 of the even date was also issued, requiring the assessee to file the return of income.

Aggrieved by the order, the assessee filed a writ petition before the Gujarat High Court.

High Court Held

The High Court held that the impugned order passed by the AO had recorded the contents of the notice issued under section 148A(b) and thereafter reproduced the entire submissions made by the assessee and again reiterated the contents of the notice under section 148A(b) to come to prima facie conclusion that it was a fit case to reopen the assessment.

Reasons are required to be given by any quasi-judicial authority dealing with the contentions raised more particularly in the Scheme of the Act when it stipulates statutory opportunity to the assessee to file a reply to the notice issued under section 148A(b) and thereafter on consideration of the reply and materials on record, the AO is required to come to the prima facie conclusion that it is a fit case to reopen the assessment.

It appeared from the impugned order that the AO had materially complied with the formalities of consideration “of reply” by reproducing the reply without dealing with the issues raised in the said reply. Merely reproduction of the reply filed by the assessee cannot be said to be in compliance with provisions of section 148A(d).

On comparison of the contents of the notice and the conclusion arrived at after reproduction of the reply of the assessee, it was apparent that the AO did not apply his mind while passing the impugned order under section 148A(d). As AO did not state as to why the submissions filed by the assessee were not acceptable and without dealing with it which was a pre-requisite passed the impugned order under section 148A(d).

Thus, failure on the part of the AO to give reasons dealing with the contentions of the assessee resulted in the entire purpose of introduction of the Scheme for reopening under section 148A as a futile exercise.

Therefore, the impugned order under section 148A(d) was not tenable as it was bereft of any reason and consequently, notice under section 148 was also liable to be quashed and set aside.