Allahabad High Court Judgments — 2023

The Tribunal held that while the impugned notice contained the necessary details and grounds for its issuance, its concluding part, which directed the petitioner to reply regarding tax and penalty and warned of an order under Section 74(9) if no reply was furnished, was problematic. However, the notice was not considered patently illegal or without jurisdiction, as it did contain the foundation of the case, namely, the allegation of no actual supply of goods. Therefore, the Tribunal did not quash the notice but relegated the petitioner to the remedy of filing a reply. The petitioner was permitted to file a reply within one month, specifically addressing the fact that goods were indeed supplied by M/s Raghav Enterprises. The Tribunal also directed that the SIB report would not be considered final and would be subject to the Assessing Authority's decision, which would consider the petitioner's reply, evidence, and offers. The ratio is that a show cause notice must lay the foundation of the case and indicate the proposed action, but if the foundation is present, the assessee should be allowed to respond, even if the proposed action is not clearly stated.

The High Court held that the maintainability of a writ petition against an order under Section 148A(d) is distinct from the scope of adjudication available. The limited scope under Article 226 is confined to the existence of information suggesting escaped assessment, in view of the scheme of the Act. The Supreme Court in Red Chilli International Sales directed the High Court to consider the reply and the order under Section 148A(d) because the issues were not examined, not to endorse that a writ petition is not maintainable. The Supreme Court in Anshul Jain observed that reassessment proceedings under Section 148 offer more exhaustive examination and remedies. The Court found no merit in the challenge to the order under Section 148A(d) and the notice under Section 148. The order passed under Section 148A(d) is subject to the final reassessment order under Section 148, and any observations on merits by the assessing authority do not prejudice the assessee's rights. The writ petition was dismissed.

The Tribunal held that the reassessment proceedings were without jurisdiction and fundamentally defective. It was undisputed that the transferor company, M/s Kanpur Builders Pvt. Ltd., did not exist as a corporate entity on March 28, 2021, when the reassessment notice was issued, as it had merged with the petitioner (transferee company) effective April 1, 2014, for AY 2015-16. The income for AY 2015-16 was correctly assessed in the hands of the petitioner/transferee company, as evidenced by the original assessment order dated December 30, 2017. The Tribunal found the revenue's reliance on Mahagun Realtors (P) Ltd. to be inapposite, as that case did not involve a lack of fundamental jurisdiction in reassessment proceedings. The reassessment notice was inherently defective and incurable. Furthermore, no notice was ever issued to the petitioner company. The assessing authority also failed to examine the original assessment order passed in the petitioner's case, which had taken note of the merger and the property sale, making it difficult to establish a valid 'reason to believe' that income had escaped assessment. Consequently, the impugned reassessment order against the transferor company was set aside for lack of jurisdiction. The Court allowed the writ petition, setting aside the order dated March 29, 2022, and leaving it open for the revenue to proceed in accordance with law, considering Section 150 of the Act and the observations made.