Order u/s 148A(d) quashed being beyond the scope of notice u/s 148A(b)

Order u/s 148A(d) quashed being beyond the scope of the notice issued under Section 148A(b).

In a recent judgment, the Hon’ble Delhi High Court quashed order passed under Section 148A(d) being beyond the scope of the notice issued under Section 148A(b) as in the notice there was no allegation that cash deposited during demonetization period was disproportionately higher in comparison with the cash deposited during the corresponding period in the previous financial year. 

ABCAUS Case Law Citation:
4522 (2025) (04) abcaus.in HC

In the instant case, the Petitioner/assessee had challenged the notices issued under Section 148A(b), order passed under Section 148A(d) and notice issued under Section 148 of the Act and also the approval purportedly granted by CCIT under Section 151 of the Act.

The assessee had taken the ground that the order passed under Section 148A(d) of the Act was beyond the scope of the notice issued under Section 148A(b) of the Act.  Thus, the principal question to be addressed was whether the impugned notice under section 148 was liable to be set aside, as it was premised on an order passed under Section 148A(d) of the Act, which was beyond the scope of the notice under Section 148A(b) of the Act.

The Assessee is a partnership firm engaged in the business of operating a chain of departmental stores. The asessee had filed its return disclosing the amount of cash deposited in the bank during the demonetisation period. The Assessee’s return was selected for scrutiny and the Assessing Officer (AO) issued a notice under Section 143(2) of the Act. One of the reasons for selecting the case for scrutiny was to examine the cash deposits made by the Assessee during the demonetization period.

After reviewing the responses and the details submitted by the Assessee, the AO passed the assessment order under Section 143(3) of the Act, accepting the Assessee’s contentions. With respect to cash deposits during the demonetisation period.

After the expiry of four years, on account of an audit objection, the AO issued show cause notices to the Assessee under Section 148A(b) of the Act, asking the Assessee to explain why the assessment in respect of AY 2017-18 should not be reopened and the income be reassessed under Section 147 of the Act.

As per the annexure to the SCN, information, which, according to the AO, suggested that the assessee’s income had escaped assessment were related to Tax Collected at Source statement, cash deposited by the Assessee during the demonetization period; and time deposits. It was also alleged that these transactions were not disclosed in the income tax returns filed by the assessee.

The AO compared the cash deposited by the assessee in its bank account during the period in FY 2015-16 corresponding to the demonetization period in the releavnt financial year. The AO found that there was huge increase in ratio of the cash deposit during the demonetization period. Hence, the AO came to the conclusion that the objection raised by the Revenue Audit Party was correct and justified said information suggested that the income had escaped assessment within the meaning of clause (ii) of Explanation 1 to Section 148 of the Act. Accordingly, the the AO passed the impugned order under Section 148A(d) of the Act.

The Hon’ble High Court observed that there was no allegation in the notice issued under Section 148A(b) of the Act that the cash deposited by the assessee in its bank account during the demonetization period was disproportionately higher in comparison with the cash deposited during the corresponding period in the previous financial year.  Thus, the assessee had no opportunity to provide any explanation in respect of such allegation.

In view of the above, the Hon’ble High Court concurred with the contention of the appellant that the impugned order passed under Section 148A(d) of the Act had travelled beyond the information furnished to the Assessee, which, according to the AO, was suggestive of its income escaping the assessment.

Accordingly, the Hon’ble High Court set aside the impugned order passed under Section 148A(d) of the Act and notice under section 148. The matter was remanded to the AO to consider the question afresh.

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