LI Network
Published on: February 16, 2024 at 14:40 IST
The Karnataka High Court has highlighted that the assessment under Section 147 of the Income Tax Act cannot be carried out merely based on a “reason to believe” that there was an escapement of income.
The Court clarified that under the amended provisions, Section 147 can be invoked only if there is an actual “escape of income,” and the Assessing Officer must be prima facie satisfied with concrete information.
The ruling emphasized that the phrase “reason to believe” is no longer a sufficient ground for assessment under Section 147.
Justice Krishna S Dixit presided over the bench and stated, “For conducting assessment under section 147, there should be not only escapement but also the reason to believe that there is such escapement, the reason being the information itself.”
The Court further mentioned that Section 148A assists the Assessing Officer in determining whether the information is substantial enough to issue a notice under Section 148.
The case involved Dr. Ramdas Madhava Pai and his wife challenging the reopening of their assessments for the Assessment Year 2018-19.
The Income Tax Department issued notices related to taxable consequences of a demerger and alleged non-reporting of share sales. The petitioners argued against the reopening, claiming no income escapement and jurisdictional flaws.
The Court emphasized that before issuing a notice under Section 148, the Assessing Officer must have information suggesting an escapement of income.
The judgment clarified that the phraseology of the amended Section 148 indicates the need for concrete information as defined in Explanation 1 to Section 148.
In conclusion, the Karnataka High Court allowed the petitions and quashed the impugned notices, underscoring the importance of tangible information for invoking the provisions of Section 147.
Case Title: Vasanthi Ramdas Pai vs The Income Tax Officer & Ors.