A division bench of the Allahabad High Court comprising Justice Surya Prakash Kesarwani and Justice Jayant Banerji has ruled that once the notice under Section 148 of the Income Tax Act, 1961, issued by the assessing authority was declared without jurisdiction, the re-assessment order, cannot be sustained under the law.
The petitioner/assessee, M/s Uphill Farms Private Limited, submitted an objection to the “reason to believe” recorded by the assessing authority. In his objection, the petitioner has specifically stated that he has not entered into any transaction amounting to Rs. 45 lakhs during the year under consideration, which has been made the basis for recording the “reason to believe” and issuing a notice under Section 148 of the Income Tax Act, 1961. The petitioner has also produced documentary evidence to show that no transaction of Rs. 45 lakhs, as alleged, was entered into by the petitioner.
The division bench has held that a perusal of the impugned notice under Section 148 of the Act, 1961 and other impugned orders clearly shows that the “reason to believe” recorded by the assessing authority, failed to pass the standard of reason exercised by the assessing authority to be that of an honest and prudent person who would act on reasonable grounds and come to a cogent conclusion.
“The reasons recorded were totally unfounded and consequently the jurisdictional notice under Section 148 of the Act, 1961 issued by the assessing authority was without jurisdiction. Once the notice under Section 148 of the Act, 1961 issued by the assessing authority was without jurisdiction, the subsequent proceedings, including re-assessment order, cannot be sustained,” the division bench opined.
Advocates Vedika Nath and Nishant Mishra appeared for the petitioners.
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