Notice can not be issued under clause (b) of Section 148A without first making inquiry under section 148A(a) of the Income Tax Act, 1961.
In a recent judgment, Hon’ble Supreme Court dismissed the SLP of the Income Tax Department against the judgment of the Hon’ble High Court which held that notice can not be issued under clause (b) of Section 148A without first making inquiry under section 148A(a) of the Income Tax Act, 1961.
ABCAUS Case Law Citation:
4818 (2025) (10) abcaus.in SC
In the instant case, the Income Tax Department had challenged the order and judgment of the Hon’ble High Court quashing notice u/s 148 and order passed u/s 148A(d) of the Income Tax Act, 1961.
The respondent company filed return of income filed the or Assessment Year 2020-21 which was processed under Section 143(1) of the Act on 28th March, 2021 accepting the returned income.
However, the Assessing Officer (AO) issued the notice under Section 148A(b) requiring the assessee to furnish information with respect to source, genuineness and creditworthiness of the persons who gave loans to the petitioner.
The assessee objected to the validity of the notice on the ground that such notice did not disclose any information with regard to the escaped income of the petitioner but it was in nature of inquiry to be conducted under Section 148A(a) of the Act.
However, the AO passed the order under Section 148A(d) of the Act rejecting the objection of the petitioner and issued the notice under Section 148 of the Act for re-opening of the assessment.
Aggrieved, the assessee filed a Petition before the Hon’ble High Court and inter alia submitted that the show-cause notice issued under Section 148A(b) of the Act was fundamentally bad as there is no information which suggest that the income had escaped assessment and there was no inspection on part of the assessee which required to issue the notice to re-open the assessment.
It was contended that notice issued under Section 148A(b) of the Act was in nature of inquiry and the same was not issued as per the provisions of the said section. It was submitted that in the said notice, the Revenue had called upon the petitioner to submit the information for verification which was not the requirement under the provisions of the Act.
The Hon’ble High Court observed that it was not in dispute that the notice under section 148A(b) was issued for calling upon the petitioner to submit various details for verification of the data which leads to the only conclusion that the notice was issued for inquiry as contemplated under Section 148A(a) of the Act.
The Hon’ble High Court noted that as per the existing provisions the Assessing Officer before issuing the notice under Section 148 of the Act has to conduct the inquiry with prior approval of the specified authority with respect to the information which suggest that the income chargeable to tax has escaped the assessment and after such inquiry, issued the notice under Section 148A(b) of the Act to provide an opportunity of being heard to the assessee by serving a show-cause notice. However, the AO had issued the notice under clause (b) of the Section 148A of the Act as if the inquiry is to be conducted under clause (a) of Section 148A of the Act and therefore, the notice cannot be commensurate the requirement of clause (b) of Section 148A of the Act as such notice could have been issued only after conducting the inquiry on part of the Assessing Officer.
The Hon’ble High Court opined that notice issued under Section 148A(b) of the Act could not have been issued for verification on the part of the Assessing Officer and therefore, the same would fail.
Accordingly, the Hon’ble High Court allowed the petition and the order under Section 148A(d) of the Act and the notice under Section 148 was quashed and set aside.
Not satisfied with the judgment of the High Court, the Department challenged it before the Hon’ble Supreme Court by way of filing a Special Leave Petition. However, the Apex Court dismissed the SLP with the following observations
“Having heard the learned counsel appearing for the petitioner– Revenue and having gone through the materials on record, we find no good ground to interfere with the impugned order passed by the High Court. The Special Leave Petition is, accordingly, dismissed.”
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