Reassessment Notice Set Aside as Non-Furnishing of Details Prevented Reconciliation of Non-Resident TDS Data

Reassessment Notice Set Aside as Non-Furnishing of Details Prevented Reconciliation of Non-Resident TDS Data

Issue

Facts

• Completed Assessment: The assessee’s original assessment was completed under Section 147 read with Section 144C(13) after due examination of receipts and nature of transactions, accepting the returned income.
• Reassessment Proceedings: The Assessing Officer (AO) subsequently issued a notice under Section 148A(1) alleging income escapement based on three specific foreign remittance items:
  1. Foreign remittances received from an Indian payer under Section 195 without Tax Deducted at Source (TDS).
  2. Foreign outward remittances referenced from Section 195(2) proceedings.
  3. Outward remittances where TDS was allegedly not deducted by the Indian remitter, based on Form 15CC verification.
• Lack of Details Provided: The AO issued the notice without supplying the underlying information/details or figures to the assessee along with the Section 148A(1) notice.
• Order Passed: The AO conducted a limited inquiry, rejected the assessee’s objections, passed an order under Section 148A(3), and issued a consequential notice under Section 148.
• Root of Dispute: The underlying dispute arose strictly due to a discrepancy/reconciliation issue between data on the Risk Management Strategy (RMS) portal and the figures accepted in the assessee’s prior assessment and the remitter’s Section 201 order.

Decision

• Quashing of Reassessment Notice: Yes. The High Court/Tribunal set aside the order passed under Section 148A(3) and the consequential notice under Section 148 because the failure to provide underlying details and conduct a proper inquiry at the Section 148A stage violated natural justice principles.
• Remand to Notice Stage: Yes. The matter was restored back to the stage of the Section 148A(1) notice.
• Directions to AO: The AO was directed to supply complete copies of the information/details to the assessee, provide an opportunity for written reply and oral hearing, and pass a fresh order after proper reconciliation.

Key Takeaways

• Mandatory Disclosure of Information: Tax authorities must provide complete underlying details and information relied upon when issuing a notice under Section 148A, ensuring the assessee gets a fair opportunity to respond.
• Reconciliation Before Reassessment: Simple portal discrepancies or reconciliation differences between RMS data, Section 201 orders, and filed returns do not automatically justify reassessment without giving the assessee a chance to reconcile figures.
• Procedural Safeguards: Failure to conduct adequate inquiry or adhere to natural justice principles at the preliminary stage invalidates the consequential Section 148 reassessment notice.