Reopening of assessment under Section 148 is valid based on audit objections if the taxpayer fails to provide timely responses or necessary documentation.

JUDGMENT :

Jitendra Jain, J.

1. This petition is instituted by the petitioner challenging an order passed under Section 148A(d) and notice under Section 148 of the Income Tax Act, 1961 (‘the Act’), both dated 28 March 2024 for the assessment year 2017-18.

Brief facts :-

2. The petitioner is an individual and has filed his return of income for assessment year 2017-18 on 3 August 2017. The said return of income was selected for scrutiny by issuing a notice under Section 142(1) of the Act for examining the claim of deduction under Section 57 of the Act. In the petition at Exhibit ‘C’, there is a copy of the email response submitted by the petitioner during the course of original assessment proceedings in which reference is made to evidence in support of the nexus between the income from other sources and deduction against that income. However, surprisingly, the enclosures to this Exhibit ‘C’ are not annexed in the present petition.

3. On 24 December 2019, an assessment order under Section 143(3) of the Act came to be passed accepting the returned income. The said assessment order does not refer to the response filed by the petitioner at Exhibit ‘C’ to the petition. Still, it states that the income is assessed after verification details are submitted.

4. On 16 March 2024, a notice under Section 148A, clause (b) of the Act for the assessment year 2017-18 was issued to the petitioner requesting the petitioner to submit his reply along with supporting documents on or before 25 March 2024 electronically @ www.income.tax.gov.in. Along with the said notice, in the annexure, information based on which the notice was issued was also furnished to the petitioner. The information referred to in the annexure states that while auditing the case of the petitioner, the audit had raised objections concerning deduction under Section 57 of the Act. The annexure states that there is no documentary evidence on record or a bank statement to prove that the said interest expenses are incurred to earn relevant income. The annexure relies upon Explanation-1 to Section 148 of the Act, which defines information suggesting income having escaped assessment to reopen the case.

5. The petitioner neither filed the reply on or before 25 March 2024 nor sought any adjournment on or before the said date. However, on 27 March 2024, an email was sent to the respondent submitting his reply to the notice issued under Section 148A(b) of the Act. The said email refers to 7 attachments, but again, none of these attachments are annexed to the present petition. It is also important to note that at pages 52 and 53 is a typed copy of the letter, which is transcribed in the email, but surprisingly, the same is undated, or the date is missed.

6. On 28 March 2024, an order under Section 148A (d) of the Act came to be passed, and along with the said order, notice under Section 148 of the Act was also issued for reopening the case for the assessment year 2017-18. In the order under Section 148A(d) of the Act, it is stated that the time allowed for submitting the reply had expired on 25 March 2024. The petitioner had neither filed any reply nor requested for adjournment; therefore, the order is passed on the premise that the petitioner has no explanation to offer.

7. Against the above backdrop, the petitioner is before us, challenging the impugned proceedings.

8. Mr. Walve, learned counsel for the petitioner, submits that the issue for which the opening is sought was examined during the regular assessment proceedings and, therefore, any attempt to reopen the case based on the audit objection would amount to a change of opinion, which is not permissible under the Act.

9. Mr. Walve in support of his submission relied upon the following three decisions :-

i. Mira Bhavin Mehta Vs Income-tax Officer, (2024) 161 taxmann.com 572 (Bombay).

ii. Knight Riders Sports Pvt. Ltd Vs Assistant Commissioner of Income Tax, Writ Petition No.2269 of 2023 dated 26 September 2023.

iii. Dilip Laximan Powar Vs Income-ta