The legality of reassessment proceedings under the Income Tax Act requires scrutiny, yet initial error claims can only be addressed post-assessment.

JUDGMENT

Heard Sri Atul Gupta, learned counsel for the petitioner and Sri Gaurav Mahajan, learned counsel for the Revenue.

2. The challenge laid in this writ petition is to the order dated 31.03.2023 and impugned notice dated 31.03.2023 whereby and where under the reassessment proceedings for the assessment year 2019-20 are sought to be initiated. A prayer for prohibiting the Respondent No.1 or any other Income Tax Authority from proceeding further with the reassessment proceedings for Assessment Year 2019-20 has been sought.

3. It is the case of the petitioner that it is a partnership firm formed on 18.04.2018 by five partners for the purposes of carrying on business of wholesale distributorship or C&F Work. The partnership firm was reconstituted on 01.11.2019 and a new partnership firm was registered as 2 out of 5 partners existed from the firm. The remaining partners infused a sum of Rs.1,75,31,000/- as capital during the FY 2018-19. It is stated that the firm during the Financial Year 2018-19 extended a loan of Rs.1,75,00,000/- equally to two widows who were the neighbours of the partners with the understanding that the same would be repaid. The loan was duly recorded in the books of the petitioner firm. In the Assessment Year 2019-20 there was no revenue generation from the business operations of the firm and consequently a return of income for Assessment Year 2019-20 was filed on 31.08.2019 declaring total income as Nil. The Deputy Director of Income Tax Investigation, Ghaziabad issued summons to the petitioner under Section 131 (1A) of the INCOME TAX ACT requiring the petitioner to furnish the details and purpose of the loan advanced to the two ladies. Petitioner is stated to have submitted detail asked for. The Respondent No.1 issued a show cause notice under section 148A(b) of the INCOME TAX ACT for Assessment Year 2019-20 stating that income declared as Nil in the return was not commensurate with the transaction of Rs.1,75,00,000/- which suggested that the income chargeable to tax had escaped assessment. The petitioner filed detailed reply to the show cause on 27.03.2023, however, the reply has not found favour with the Respondent No.1 and the impugned order has been passed.

4. Learned counsel for the petitioner has vehemently argued that the impugned order passed by the Respondent No.1 and returned that the income chargeable to tax has escaped assessment with the meaning of section 147 of the INCOME TAX ACT is wholly erroneous an without application of mind inasmuch as the returns filed by the borrowers i.e. the two widow ladies for the Assessment Year 2019-20 has been accepted by the Income Tax Officer Ward (2)(3)(4), Hapur under Section 148 (d) of the Act and there was no occasion to doubt the return filed by the petitioner for the Assessment Year 2019-20. It is also argued that the impugned order passed by the Respondent No.1 suffers from the vice of non compliance of the principles of natural justice inasmuch as though a show cause notice was given but no opportunity of personal hearing was afforded. It is further submitted that the reassessment proceedings initiated are without jurisdiction, the time limit provided to submit reply to the show cause notice under Section 148 A(b) was in contravention of the requirement of the law inasmuch as the law contemplate 07 day but only 05 days were provided to the petitioners, the impugned notice has been issued to verify the facts which is impermissible in reassessment proceedings, the copy of the approval of specified authority, information replied upon and the results of enquiry not provided to the petitioner. It is thus submitted that the impugned ord