Bombay High Court: Assessing Officer Must Verify Details Before Reassessing Based On Faceless Information
Bombay High Court: Assessing Officer Must Verify Details Before Reassessing Based On Faceless Information
The Bombay High Court has ruled that Assessing Officers (AOs) are required to verify details before initiating reassessment proceedings based solely on faceless information.
A division bench of Justices G. S. Kulkarni and Somasekhar Sundaresan held that when an AO intends to initiate action under Section 148 of the Income Tax Act based on information obtained electronically under Section 135A, the AO must first verify relevant materials from the assessee or other sources. The AO cannot issue a notice under Section 148 without appropriately verifying these materials and forming an opinion that it is permissible to dispense with the procedure under Section 148A.
The petitioner/assessee filed a return of income for the assessment year on December 22, 2020. On January 16, 2021, an intimation was issued accepting the total income disclosed without any additions. However, on April 2, 2021, the petitioner received information via the Insight Portal indicating discrepancies in the interest income reported. The portal suggested the petitioner’s income from other sources was ₹26,41,234.65. The petitioner responded on April 3, 2021, asserting that the actual interest income was ₹8,88,577, and the remaining ₹17,52,657.65 was incorrect.
Over a year later, the petitioner received a reassessment notice under Section 148 along with approval from the respondent and a preliminary verification report (PVR). The approval under Section 151 authorized the issuance of the notice without following the pre-issuance procedure under Section 148A.
The petitioner argued that the reassessment notice was arbitrary, issued without proper application of mind, and based solely on erroneous electronic information from the portal. The petitioner contended that the AO should have examined responses and other materials before issuing the notice. The department countered that the information from the petitioner’s return was correct, and the interest income now reflected correctly in the system was ₹8,72,799.65.
Section 135A empowers the Central Government to create a scheme for calling and collecting information to enhance transparency and reduce direct interaction between tax authorities and assessees. This section is relevant when the AO relies on faceless information to issue a notice under Section 148.
The court emphasized the necessity for AOs to verify the information before issuing a show-cause notice under Section 148. It is crucial that the AO ensures the correctness of the data, as faulty data can lead to unjust proceedings. The court highlighted that if the AO fails to verify the data properly, it would undermine the procedural requirements of Section 148.
The High Court found the notice issued under Section 148 to be arbitrary and based on a lack of proper verification. Consequently, the notice was quashed and set aside, as it was deemed vitiated by non-application of mind.
