[Opinion] Classic Case of Failure to Discharge Obligation u/s 148A in a Proper Manner

Gopal Nathani – [2023] 156 taxmann.com 444 (Article)

Section 148A

Conducting inquiry, providing opportunity before issue of notice under section 148.

148A. The Assessing Officer shall, before issuing any notice under section 148,—

(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;

(b) provide an opportunity of being heard to the assessee, by serving upon him a notice to show cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice under section 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);

(c) consider the reply of assessee furnished, if any, in response to the show-cause notice referred to in clause (b);

(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice under section 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:

Provided that the provisions of this section shall not apply in a case where,—

(a) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A in the case of the assessee on or after the 1st day of April, 2021; or

(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search under section 132 or requisitioned under section 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or

(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search under section 132 or requisitioned under section 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, 24[relate to, the assessee; or

(d) the Assessing Officer has received any information under the scheme notified under section 135A pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.

Explanation. —For the purposes of this section, specified authority means the specified authority referred to in section 151.

The Approach

The Supreme Court in Union of India and Others v. Ashish Agarwal [2022] 138 taxmann.com 64/286 Taxman 183/444 ITR 1 (SC) held that under the provisions of sections 147 to 149 of the Act as substituted by the Finance Act, 2021 and section 151A, no notice under section 148 of the Act can be issued without following the procedure prescribed under section 148A.

The Income tax law in this regard declares the following mandatory steps:

Step 1. the Assessing Officer shall conduct any enquiry, if required, with the approval of specified authority, with respect to the information which suggests that income chargeable to tax has escaped assessment,

Step 2. the Assessing Officer shall provide an opportunity of being heard to the assessee, with the prior approval of the specified authority,

Step 3. the Assessing Officer shall consider the reply of the assessee furnished, if any, in response to the show-cause notice referred to in clause (b),

Step 4. the Assessing Officer shall decide, on the basis of material available on record including the reply of the assessee, whether or not it is a fit case to issue a notice under section 148 of the Act, and

Step 5. the Assessing Officer is required to pass a specific order within the time stipulated.

Thus the Assessing Officer is bound to consider the reply of the assessee before passing any order under section 148A (d). There is however no limitation placed in the section in terms of the scope of enquiry, extent of enquiry or the manner in which the reply is to be considered except that the enquiry ought to be time bound.

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