Revenue Audit Objections Valid Ground For Reopening Concluded Assessment Under Section 148 Of IT Act: Allahabad High Court

Revenue Audit Objections Valid Ground For Reopening Concluded Assessment Under Section 148 Of IT Act: Allahabad High Court

The Allahabad High Court has partially allowed a writ petition challenging an order under Section 148-A(d) of the Income Tax Act, 1961. The petitioner had alleged that the Assessment Officer (AO) failed to provide relevant documents and an opportunity for a personal hearing before passing the impugned order.

The petitioner, along with his brother, conducted separate businesses involving the trading of jewelry from a shop in Lucknow. They later expanded their businesses by acquiring another shop in the same city. During a search and seizure operation under Section 132 of the Income Tax Act, cash, gold, silver jewelry, and loose documents were discovered at their joint shop. While the loose documents were impounded, the gold and silver were treated as stock-in-trade and were not seized.

The petitioner subsequently filed a return of income declaring a total income of ₹16,65,590/-. The Assessing Officer issued a notice under Section 142(1) of the Act, requiring the petitioner to provide supporting documents for the income declared. After considering the petitioner’s reply, the AO passed an order under Section 143(3) of the Act, making certain additions to the petitioner’s declared income based on unexplained cash and excess stock not recorded in the books of accounts.

The petitioner appealed the assessment order before the Commissioner of Income Tax. During the pendency of the appeal, the Revenue Audit raised objections, claiming that the assessment had not been conducted according to the Act and had violated Section 69(A) of the Act. The petitioner submitted a circular issued by the Central Board of Direct Taxes (CBDT) on August 22, 2022, which outlined guidelines for issuing notices under Section 148 of the Income Tax Act.

On March 27, 2024, the respondents issued a notice under Section 148-A(b) of the Act based on the audit objections. The petitioner replied in detail, requesting copies of the audit objections and other relevant documents, as well as a personal hearing. However, on April 20, 2024, the AO passed the impugned order under Section 148-A(d) of the Act, rejecting the petitioner’s reply without providing the requested documents or a personal hearing. A notice under Section 148 of the Act was also issued on the same date, proposing the reassessment of income.

The Division Bench, comprising Justice Sangeeta Chandra and Justice Prakash Singh, did not comment on the merits of the petitioner’s case but focused on the procedural aspect of providing a reasonable opportunity of hearing as per the CBDT circular dated August 22, 2022. The Court observed that the AO had acted with undue haste by not granting the petitioner an opportunity to be heard before issuing the order under Section 148-A(d) of the Act.

The Court acknowledged that Revenue Audit Objections could be a valid ground for reopening an assessment under Section 148 of the Act. However, the AO’s failure to provide relevant documents and a personal hearing was deemed a procedural lapse.

Consequently, the Court set aside the impugned order and directed the respondents to provide the petitioner with all relevant documents within one week, upon payment of the requisite fees by the petitioner. The Court also ordered that the petitioner be granted a personal hearing before the Assessing Officer. Following this hearing, the Assessing Officer is required to pass an order under Section 148(d) of the Act within three weeks.