Bombay High Court Declines Writ Against Reassessment Orders Passed Under Section 147 r.w.s. 144B

1. Background of the Dispute

A batch of writ petitions under Article 226 of the Constitution of India came before the Bombay High Court challenging reassessment orders framed under Section 147 read with Section 144B of the Income Tax Act 1961. The orders had been passed by the National E-Assessment Centre, New Delhi.

The Revenue, at the threshold, objected to the maintainability of the writ petitions, pointing out that a specific statutory appeal remedy was available to the assessee under Section 246(1) of the Income Tax Act 1961. On that basis, it was contended that the Court should refrain from exercising its extraordinary writ jurisdiction.

The petitioners, on the other hand, argued that the reassessment itself was without jurisdiction, and therefore they were entitled to directly invoke Article 226 without being compelled to pursue the appellate route.

2. Facts in the Lead Matter – AY 2015-16

For convenience, the Court treated Writ Petition No. 4141 of 2022 as the lead petition, since the pleadings in that case were complete.

2.1 Initiation of Reassessment

  • For Assessment Year 2015-16, a notice under Section 148 dated 29.03.2021 was issued to the petitioner by the Income Tax Officer.
  • The notice recorded “reasons to believe” that income chargeable to tax for AY 2015-16 had escaped assessment within the meaning of Section 147.
  • The assessee was called upon to furnish a return of income for that year.
  • In response, the assessee filed the return on 22.01.2022.
  • Subsequently, on 27.01.2022, a notice under Section 143(2) read with Section 147 was issued, along with annexures detailing the grounds for reopening.

2.2 Basis of “Reasons to Believe”

The annexures to the Section 143(2) notice indicated that:

  • The Assessing Officer had received certain information from the Insight Portal, flagged as high-risk CRIU/VRU information.
  • A search and seizure action had been conducted in the case of M/s. Renuka Mata Multi-State Urban Co-operative Credit Society Limited on 26.05.2017.
  • During that search and subsequent assessment proceedings of the Society, large cash deposits in its bank accounts were noticed, for which the Society allegedly could not satisfactorily explain the source.
  • On further verification, it appeared that the petitioner had deposited Rs. 8,41,93,228/- in his account with M/s. Renuka Mata Multi-State Urban Co-operative Credit Society Limited during Financial Year 2014-15.
  • On this basis, the Assessing Officer formed the belief that income chargeable to tax for AY 2015-16 had escaped assessment within the ambit of Section 147.
  • As the reopening was within four years from the end of AY 2015-16, prior sanction of the Additional Commissioner of Income Tax was obtained under Section 151 before issuance of the Section 148 notice.

2.3 Show-Cause Proceedings and Assessment Order

  • In response to a Section 142(1) show-cause, the assessee filed a reply on 28.02.2022, stating inter alia that:
    • He was illiterate and unaware of legal requirements.
    • No books of account were maintained.
    • He had not filed a return of income for the relevant year due to non-availability of old records.
  • On 21.03.2022, the department issued a further show-cause notice explaining that:
    • The entire cash deposit of Rs. 8,41,93,228/- remained unexplained.
    • It was proposed to treat the same as unexplained money under Section 69A and add it to the total income.
    • Penalty proceedings under Section 271(1)(c) were also proposed.
  • The assessee’s reply dated 24.03.2022 admitted total deposits for AY 2014-15 in the bank accounts with the Society, but denied the correctness of the Department’s case and asserted absence of supporting evidence.

On 25.03.2022, the National E-Assessment Centre passed the assessment order under Section 147 read with Section 144B:

  • The explanation for the source of deposits was rejected.
  • The assessee’s contention that the bank transactions occurred without his knowledge was not accepted.
  • The total income was computed at Rs. 8,45,05,360/-.
  • A demand notice and a penalty notice under Section 271(1)(c) were directed to be issued, and penalty notice was in fact issued the same day.

These assessment orders were the subject matter of challenge in the writ petitions.

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