Facts of the Case

The appellant, Barbrik Projects Ltd., challenged the order passed under Section 148A(d) of the Income Tax Act, 1961 dated 31.03.2022 and the consequential notice issued under Section 148 for reopening the assessment relating to Assessment Year 2018-19.

The appellant had originally filed its return of income under Section 139(1), which was subsequently assessed under Section 143(3). Thereafter, the Assessing Officer issued a show cause notice under Section 148A(b) based on information received through the INSIGHT Portal (High Risk CRIU/VRU) alleging that the appellant had received accommodation entries and made bogus purchases amounting to ₹2,20,00,275 from M/s Panveen Trading Private Limited, an entity allegedly engaged in issuing fake invoices without actual supply of goods for passing irregular Input Tax Credit (ITC).

The appellant denied the allegations, relied upon a Chartered Accountant's certificate stating that no such transactions had taken place, and sought copies of the material relied upon by the Assessing Officer. Despite the reply, the Assessing Officer passed an order under Section 148A(d) holding it to be a fit case for issuance of notice under Section 148. The writ petition challenging the proceedings was dismissed by the Single Judge, leading to the present writ appeal.

Issues Involved

  1. Whether the Assessing Officer possessed valid information suggesting escapement of income under Sections 147 and 148 of the Income Tax Act.
  2. Whether an order passed under Section 148A(d) was liable to be quashed for alleged non-supply of documents and non-consideration of the assessee's reply.
  3. Whether reopening of assessment could be sustained on the basis of information received from the INSIGHT Portal (High Risk CRIU/VRU) regarding bogus purchase transactions.
  4. Whether the High Court should interfere with reassessment proceedings at the stage of issuance of notice under Section 148.

Petitioner's Arguments

  • The appellant contended that there was no valid information suggesting escapement of income as contemplated under the amended provisions of the Income Tax Act.
  • It was argued that the Assessing Officer failed to conduct the enquiry contemplated under Section 148A(a) before issuing the show cause notice.
  • The Assessing Officer allegedly failed to properly consider the reply submitted under Section 148A(b) while passing the order under Section 148A(d).
  • The appellant also submitted that copies of the underlying information, documents, fake invoices and approval granted by the specified authority were not supplied despite specific request.
  • Reliance was placed upon several judicial precedents including Excel Commodity & Derivative Pvt. Ltd., Studio Virtues, Aten Capital Pvt. Ltd., Dharmendra Kumar Singh, and Sahara India (Firm) to contend that reassessment proceedings were vitiated for violation of statutory safeguards and principles of natural justice.

Respondents' Arguments

  • The Revenue submitted that the Assessing Officer possessed credible tangible information obtained through the INSIGHT Portal showing that the appellant was a beneficiary of accommodation entries.
  • It was argued that Section 148A(a) does not mandate enquiry in every case and that sufficient material existed for initiating reassessment proceedings.
  • The appellant had merely produced a Chartered Accountant's certificate without producing books of account or bank statements to rebut the allegations.
  • It was further contended that the appellant never sought a personal hearing despite opportunity having been provided in the show cause notice.
  • The Revenue relied upon judicial precedents including Gian Castings Pvt. Ltd., Raymond Woollen Mills Ltd., M.R. Shah Logistics Pvt. Ltd., NRA Iron & Steel Pvt. Ltd., and Gulmuhar Silk Pvt. Ltd. to submit that writ jurisdiction should not ordinarily be exercised at the stage of reopening of assessment.

Court Order / Findings

The Chhattisgarh High Court dismissed the writ appeal and upheld the reassessment proceedings.

The Court observed that:

  • the Assessing Officer possessed prima facie tangible material indicating escapement of income;
  • the information received through the INSIGHT Portal constituted relevant material for initiating proceedings under Section 148A;
  • the appellant merely relied upon a Chartered Accountant's certificate and failed to produce supporting books of account or bank statements to effectively rebut the allegations;
  • the appellant also failed to avail the opportunity of personal hearing offered by the Assessing Officer.

The Court held that the sufficiency or correctness of the material cannot be examined at the stage of issuance of notice under Section 148, and that the reassessment proceedings provide adequate statutory opportunity to the assessee to establish its defence.

The Court further held that there existed prima facie material justifying reopening of assessment and, therefore, no interference with either the order passed under Section 148A(d) or the notice issued under Section 148 was warranted.

Accordingly, the writ appeal was dismissed.

Important Clarification

  • Information generated through the INSIGHT Portal (High Risk CRIU/VRU) can constitute tangible material for initiating reassessment proceedings under the amended provisions of the Income Tax Act.
  • At the stage of issuance of notice under Section 148, courts examine only whether prima facie material exists and do not adjudicate the correctness or sufficiency of such material.
  • Mere production of a Chartered Accountant's certificate, without supporting books of account or financial records, may not be sufficient to dislodge the information relied upon by the Assessing Officer.
  • The assessee is expected to raise all factual and legal objections during reassessment proceedings, and writ jurisdiction is ordinarily not invoked at the threshold stage of reassessment.
  • The judgment reiterates the principles governing reassessment proceedings after the amendments introduced by the Finance Act, 2021.

Sections Involved

  • Section 147 – Income Escaping Assessment.
  • Section 148 – Issue of Notice Where Income Has Escaped Assessment.
  • Section 148A – Conducting Enquiry and Opportunity Before Issuance of Notice.
  • Section 151 – Prior Approval of Specified Authority.
  • Section 143(3) – Regular Assessment.
  • Section 139(1) – Filing of Return of Income.
  • Finance Act, 2021 – Amended Reassessment Framework.

Link to download the order - https://mytaxexpert.co.in/uploads/1782895494_219compressed.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.