WHETHER NOTICE U/S 148 IS VALID IF REASONS ARE VAGUE AND CRYPTIC?
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Short note of today's case law for quick reference:
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[2024] 463 ITR 94 (Guj)
[IN THE GUJARAT HIGH COURT]
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BHARATKUMAR NIHALCHAND SHAH
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INCOME-TAX OFFICER
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1. Assessing Officer issued notice u/s 148 to the assessee by giving reasons that from the data made available, it was seen that the assessee had created a profit/loss of Rs 74,62,860/- and that both buying and selling of trades had been executed at the Bombay stock exchange did not give any fact regarding the transactions or other attendant fact except saying that the assessee had engaged in the trading at the stock exchange to create profit or loss.
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2. On writ petition to challenge the notice u/s 148, the High Court held that:
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3. The reason for re-opening the assessment u/s 147 were cryptic and that they did not furnish details, on the basis of which the assessee could defend his case.
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4. The ground for re-opening was unreasoned.
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5. Therefore, the notice u/s 148 for the A.Y 2015-16 was set aside.
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6. The Assessing Officer was not precluded from proceedings again against the assessee by issuing fresh reasoned notice u/s 148 if the limitation period permits.
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7. The necessity to incorporate reasons in administrative, quasi-judicial or judicial orders is an essential feature of dispensation of justice.
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8. The proposition laid down in decisions by the Supreme Court the legal principles are:
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(a) Reasons are of paramount importance and introduce clarity in any order.
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(b) The concept of reasoned judgement is an indispensable part of the basic rule of law and mandatory requirement of procedural law.
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(c) Only clarity of thoughts leads to proper reasoning, which becomes the foundation of a just and fair decision.
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(d) The reason are a requirement of ensuring judicial accountability reflecting candidness on the part of the decision maker and the decision making process transparent, in the absence of which it is impossible to know whether the person deciding the issue is faithful to the doctrine of precedent or to the principle of incrementalism.
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(e) The reasons in support of decisions must be cogent, clear and succinct and a pretence of reasons or rubber-stamp reasons cannot be equated with a valid decision process.
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(f) Reasons also facilitate the process of judicial review by superior courts.
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9. In view of the indispensability of reasons in the order passed by any authority administrative, quasi-judicial or judicial, in exercise of powers u/s 147 & 148, there has to be a greater trust for the necessity of recording reasons.
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10. The re-opening of the assessment u/s 147 hinges on the reasons recorded by the assessing officer.
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11. All the reasons which hold good with the A.O. must be known to the assessee who has the right to refute the reasons for assessment by filing objections.
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12. Unless the A.O. appropriately delineates and communicates the reasons for reassessment , the right of the assessee to file objections would remain an eye wash.
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13. Whether the reassessment powers are adverted to on an objective basis, element of assessment of income is noticed from the facts and formation of opinion by the A.O. is based on some relevant facts or not, could be judged provided the reasons are properly recorded and the details are given with regard to re-opening of assessment and the reasons to belief must be reflected in recording of such reasons to be communicated to the assessee.
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14. The cryptic way of recording of reasons would render the exercise of powers vitiated.
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15. With vague reasons the assessee could be said to have failed to demonstrate that there is any escapement of income chargeable to tax.
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16. He could demonstrate such element if the A.O. give reasons for the re-opening of the assessment.