The notice issued under Section 148A(b) of the Income Tax Act was invalid due to procedural errors, lacking necessary information on escaped income and failing to follow required inquiry protocols.

JUDGMENT :

(Bhargav D. Karia, J.)

1. Heard learned advocate Mr.B.S.Soparkar for the petitioner and learned Senior Standing Counsel Mr.Karan Sanghani for learned advocate Mrs.Kalpana K. Raval for the respondent.

2. Rule, returnable forthwith. Learned Senior Standing Counsel Mr.Karan Sanghani waives service of notice of rule for and on behalf of the respondent.

3. By this petition under Article 226 of the Constitution of India, the petitioner has challenged notice dated 05.03.2024 issued under Section 148A(b) of the Income Tax Act, 1961 (for short ‘the Act’) and order dated 24th March, 2024 passed under Section 148A(d) of the Act and the consequential notice of the same date issued under Section 148 of the Act.

4.1. The brief facts of the case are that the petitioner-company which is incorporated under the provisions of the Companies Act, 2013 on 17.10.2019 filed return of income for Assessment Year 2020-21 declaring total income of Rs.2,58,250/- on 27.11.2020 which was processed under Section 143(1) of the Act on 28th March, 2021 accepting the returned income.

4.2. The respondent issued an impugned notice under Section 148A(b) of the Act on 05.03.2024 requiring the petitioner to furnish information with respect to source, genuineness and creditworthiness of the persons who gave loans to the petitioner.

4.3. The petitioner filed detailed reply dated 16th March, 2024 objecting to the validity of the impugned notice on the ground that such notice does not disclose any information with regard to the escaped income of the petitioner but it is in nature of inquiry to be conducted under Section 148A(a) of the Act.

4.4. The respondent passed the impugned order dated 24th March, 2024 under Section 148A(d) of the Act rejecting the objection of the petitioner and issued the notice under Section 148 of the Act for re-opening of the assessment.

5.1. At the outset, learned advocate Mr.B.S.Soparkar for the petitioner submitted that the impugned show-cause notice issued under Section 148A(b) of the Act is fundamentally bad as there is no information which suggest that the income had escaped assessment and there is no inspection on part of the assessee which require to issue the notice to re-open the assessment.

5.2. It was further submitted that the reply of the petitioner is also not considered in proper perspective while passing the impugned order under Section 148A(d) of the Act as the same is passed entirely on different issue for which no notice under Section 148A(b) of the Act was issued. It was submitted that the respondent-authority could not have rectified the notice issued under Section 148A(b) of the Act in the order passed under clause (d) of Section 148A of the Act.

5.3. Referring to the impugned order dated 24th March, 2024, it was pointed out that the order is passed on different basis requiring on the ground that the loan obtained by the petitioner is not used for the business purpose and accordingly, the entire order is on a different tangent. It was therefore submitted that there is no violation of contractual conditions by the petitioner by utilising the loan to purchase the property and even if it be so it does not amount to escapement of income for the respondent to take any action.

5.4. Learned advocate Mr.B.S.Soparkar, however, emphatically submitted that the impugned notice issued under Section 148A(b) of the Act is in nature of inquiry and the same is not issued as per the provisions of the said section. It was submitted that in the impugned notice, the respondent has called upon the petitioner to submit the information for verification which is not the requirement under the provisions of the Act.

5.5. In support of his submissions, reliance was placed on the decision of this Court in case of Safal Constructions India Private Limited Through Director Rupesh Balvantbhai Brahmbhatt versus Assistant Commissioner of Income Tax Cent Circle 1(4) Ahmedabad rendered on 19.10.2023 in Special Civil Application No.10111 of 2023.

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