High Court defines ‘information’ based on which AO can initiate action u/s 148A

Case Details: Stewart Science College v. ITO - [2022] 143 taxmann.com 80 (Orissa)

Judiciary and Counsel Details

• • Jaswant Singh & Murahari Sri Raman, JJ.
  • Prajnaraj Mohanty, Adv. for the Petitioner.
  • Radheyshyam Chimanka, Sr. Standing Counsel for the Respondent.

Facts of the Case

The assessee was an educational institution, claiming exemption under section 10(23C). The Assessing Officer (AO) issued notice to the assessee seeking a response on cash deposits and non-furnishing of return of income. The assessee submitted that it was not required to furnish a return of income for such relevant assessment year as per the provisions of the Income-tax Act.

Upon considering such response, AO passed an order under section 148A(d) assigning reasons that the assessee accepted about the transactions made in the bank account. Accordingly, the case is considered a fit case for issuance of notice under Section 148.

The assessee filed a writ petition before the Cuttack High Court challenging the validity of the notice issued and reassessment proceedings initiated.

High Court Held

The High Court held that AO had the information which was described in the notice itself, i.e., information about the deposit of cash in the banks by the assessee. Section 148A uses the word “information” that provides power to AO to initiate action under this section.

The connotation of “information” in the context of reopening of assessment has succinctly been laid down by the Supreme Court in the case of Larsen & Toubro Ltd. v. State of Jharkhand [2017] 79 taxmann.com 267 (SC).

The Apex Court had held that information includes instruction or knowledge derived from external sources concerning facts, parties, or law relating to the assessment. Also, it includes the discovery of new facts or information available in the records not previously noticed.

The word “information” used in Section 148A is of the widest amplitude and should not be construed narrowly.

Suppose a mistake in the original order of assessment is not discovered by AO. However, on further scrutiny, if it came to the notice of another AO, or even by a subordinate or a superior officer, it would be considered as information disclosed to the incumbent officer.

In the instant case, the notice issued under Section 148A(b) demonstrated that the AO had in possession of “information” about the deposit of cash in the banks by the assessee. Accordingly, reassessment was justified.