Unreported Transactions: How They Can Lead to a Notice under Section 147 read with Section 148

In a recent case, the petitioner challenged an order passed by the Assessing Officer under section 148A(d) of the Income-tax Act, 1961. This order was issued in relation to proceedings for reassessment for the assessment year 2015-16, for which the petitioner had not filed a return of income. The respondent had issued a notice under section 148A(b) on the basis of information received, indicating that the petitioner had purchased immovable property and received salary income, but had not filed a return of income for the relevant assessment year.

The respondent had asked the petitioner to show cause why an order under section 148A(d) should not be passed, as there was prima facie evidence of escapement of income from assessment. The respondent referred to the evidences available with him in support of his belief that the petitioner had not paid tax on salary income earned, and had further utilized his PAN for sale transactions involving substantial consideration which had not been reported by him.

In response to the show cause notice, the assessee filed a return offering salary income from two entities and claimed that his PAN was utilized by his employer-company for entering into lease transactions. However, the Assessing Officer issued a notice of reopening assessment, as the assessee had failed to file his return when taxable income had been received.

The court held that there was no lacuna in the assumption of jurisdiction by the Assessing Officer, as the assessee had not filed his return when taxable income had been received, and had not paid tax on the salary income earned. Furthermore, the assessee had utilized his PAN for sale transactions involving substantial consideration, which had not been reported by him.

Therefore, the impugned order was upheld and the writ petition was dismissed, in favor of the revenue. This case highlights the importance of filing a return of income, even if the taxable income has already been received, and of reporting all income and transactions to the tax authorities.

In conclusion, it is important for individuals and businesses to comply with the provisions of the Income-tax Act, 1961, and to ensure that all income and transactions are reported accurately and in a timely manner. Non-compliance can lead to serious consequences, such as the reopening of assessments and the imposition of penalties, as seen in this case.

(Related Assessment year : 2015-16) – [Ayyappan Pillai Kumaresan v. ITO (2023) 146 taxmann.com 12 (Mad.)]

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