Notice u/s 148 invalid as reasons recorded incorrect information that return was processed u/s 143(1) and no scrutiny assessment was done under Section 143(3) of the Act.
In a recent judgment, Hon’ble Supreme Court has dismissed a SLP of the Revenue against the judgment of the Gujarat High Court holding notice issued u/s 148 as invalid as reasons recorded stated that the return was processed only under Section 143(1) of the Act and no scrutiny assessment was passed under Section 143(3) of the Act.
ABCAUS Case Law Citation:
4374 (2025) (01) abcaus.in SC
In the instant case, the Revenue had filed a Special Leave Petition (SLP) before the Hon’ble Supreme Court challenging the order passed by Gujarat High Court holding notice u/s 148 of the Income Tax Act, 1961 (the Act).
The case of the respondent assessee was selected for scrutiny and notice under Section 143(2) of the Act and subsequent notice under Section 142(1) of the Act were issued upon the petitioner along with detailed questionnaires. The petitioner submitted its reply. Subsequently another notice under Section 141(1) of the Act was issued and the same was also replied by the respondent.
In response to certain further queries raised by the Revenue during the course of hearing, the petitioner responded to those queries along with details about the trading summary of transactions done through a broker. Thereafter, a specific show cause notice was issued requiring the petitioner, inter-alia, to submit details and clarification about transactions done through the said broker. The respondent assessee replied and explained the transactions along with an affidavit.
Thereafter, an assessment order under Section 143(3) of the Act was passed by making addition under Section 68 of the Act. However, the same amount was set-off against against an allowable carried forward loss of the same amount. Thereafter, a notice under Section 271 read with Section 271(1)(c) of the Act was also issued.
After a gap of four years, a notice under Section 148 of the Act was issued to the assessee asking, inter-alia, the petitioner to file return. The assessee raised objections against the reopening of assessment case. However, the AO disposed of the objections filed by the petitioner, justifying opening of reassessment under Section 147 of the Act.
Not satisfied, the respondent assessee approached the Hon’ble High Court and raised the objection to the legality of notice u/s 148 on the ground that reopening of assessment was based on factually incorrect information as the AO in the reasons incorrectly recorded that the case of the petitioner was only processed under Section 143(3) of the Act and there was no scrutiny assessment.
The Revenue contended that assessment under Section 147 of the Act sought to be reopened on different set of facts which were not available at the time of original scrutiny assessment under Section 143(3). It was also submitted that merely because of small typographical error occurred in reasons of reopening of assessment cannot be vitiated as the said mistake would not cause any prejudice to the petitioner.
The Hon’ble High Court opined that the Assessing Officer had while issuing notice and recording reasons completely gone into oblivion to the fact that in the instant case, the assessment order under Section 143(3) of the Act was passed by keeping in mind all the details available with regard to transaction done through the broker under question on NMCE platform. However, the Assessing Officer had mechanically recorded that the return was processed only under Section 143(1) of the Act which itself suggestted that recording of reasons at the instance of Assessing officer was nothing but in a mechanical manner and with no application of mind.
The Hon’ble High Court further observed that in addition to the aforesaid, at the time when the assessment order under Section 143(3) of the Act was passed, the then Assessing Officer was in possession of the transaction details through the said broker and thereby, the same cannot be made subject matter again to assume jurisdiction under Section 148 of the Act for reopening of assessment, as the same had already been concluded.
The Hon’ble High Court held that the opening on the basis of the same details was nothing but change of opinion and the same is not permissible in the eye of law.
Accordingly, the Hon’ble High Court allowed the Petition of the assessee and quashed the impugned notices under Section 148.
Not satisfied with the order of the High Court, the Income Tax Department challenged it before the Hon’ble Supreme Court by filing a Special Leave Petition (SLP).
However, the Apex Court dismissed the SLP with following observations;
“There is a gross delay of 185 days in filing the Special Leave Petition which has not been satisfactorily explained by the petitioner. Even otherwise, we see no reason to interfere with the impugned order passed by the High Court. The Special Leave Petition is, accordingly, dismissed on the ground of delay as well as on merits.”
Download Full Judgment Click Here >>
- ITAT deleted addition for cash deposited in bank account where return was filed u/s 44AD
- Exemption u/s 11 can’t be denied for belated filing of Revised Form 10B – ITAT
- Limitation for prosecution u/s 276B for TDS/TCS default as per CBDT SOP only directory
- Excel Utilities of ITR-1 to ITR-4 for AY 2025-26 made available at Income tax e-filing Portal
- Escapement of income to be examined in original return, not filed in response to notice u/s 148
