Prima facie satisfaction u/s 148 can not be a non-existing or incorrect information

The prima facie satisfaction u/s 148 cannot be stretched to a non-existing information or incorrect information – ITAT

In A Recent judgment, ITAT Hyderabad has held that the prima facie information considered by the AO for issue of notice u/s 148 cannot be stretched to a non-existing information or incorrect information

ABCAUS Case Law Citation:
5058 (2026) (02) abcaus.in ITAT

In the instant case, the assessee had challenged the order passed by the Commissioner of Income Tax (Appeals), NFAC in confirming addition u/s 69A of the Income Tax Act, 1961 (the Act) for cash deposits in bank.

The assessee raised a legal ground in light of provisions of sec 149(1)(b) of the Act r.w.s. 148A(d) that the initiation of proceeding by issuance of show cause notice u/s 148A(b) of the Act, passing of order u/s 148A(d) of the Act, issuance of notice u/s 148 of the Act, 1961 and consequential proceedings were invalid as the alleged escaped income doesn’t exceeds Rs.50 lakhs in terms of sec 149(1)(b) of the Act as the proceeding had been initiated based on wrong facts and reason recorded.

The assessee was an individual but had not filed her return of income for the relevant Assessment Year. As per specific information flagged by the Risk Management Strategy formulated by the CBDT through ITBA Portal software under the head “NMS Case”, the assessee had made cash deposits in bank a/c held with Bank during the year under consideration.

Therefore, notice u/s 148A(b) of the Act was issued and served on the assessee The assessee had not filed any explanation for the notice; therefore, the AO passed an order u/s 148A(d) of the Act and issued a notice u/s 148 of the Act. In response, the assessee filed her return of income.

The case of the assessee was selected for scrutiny. During the course of assessment proceedings, the AO called upon the assessee to explain the source for the said cash deposits. The assessee explained that the source for the deposits was out of withdrawal from post office deposit a/c and maturity proceeds of post office deposits. The AO after considering the relevant explanation of the assessee observed that the assessee had not furnished the source to the fullest and remaining cash deposits had not been explained. Therefore, the AO made addition u/s 69A of the Act, as unexplained money.

Before the Tribunal, the assessee submitted that although the AO had considered certain information, which showed the time deposits of Rs. 60,00,000/- made by the assessee in but finally concluded that the assessee was having only time deposits of a lesser amount. Further, as per the bank statement, the total credits in the Bank account were which included cash deposits and other credits being maturity proceeds of postal deposits receipts. The AO without appreciating the evidence simply on the basis of a non-existing information reopened the assessment beyond 3 years from the end of the relevant AY, even though escaped income did not exceed Rs. 50 lakhs in terms of section 149(1)(b) of the Act. Therefore, the reopening of the assessment was bad in law and liable to be quashed.

The AO argued that the information considered by him for the purpose of issue of notice u/s 148A(d) of the Act in excess of Rs. 50 lakhs. Further, the assessee had not furnished any details explaining the show cause notice issued by the AO and therefore, the AO on the basis of the information available with the Department had reopened the assessment by passing the order u/s 148A(d) of the Act and issued show cause notice u/s 148 beyond 3 years from the end of the relevant AY, because the income escaped the assessment exceeds Rs. 50 lakhs as per Section 149(1)(b) of the Act. Therefore, he submitted that there was no merit in the argument of the assessee and the same should be rejected.

The Tribunal observed that as per the provisions of section 149(1)(a) of the Act, no notice u/s 148 shall be issued for the relevant A.Y, if 3 years have elapsed from the end of the relevant A.Y, unless the case falls under clause (b). Further, clause (b) of section 149(1)(b) of the Act, if three years have elapsed from the end of the relevant assessment year, unless the AO in his possession books of account or other documents or evidence which reveal that the income chargeable to tax has escaped the assessment amount or likely to Rs. 50 lakhs or more.

The Tribunal further observed that in the present case, the AO had considered the provisions of section 149(1)(b) of the Act for issuance of notice u/s 148 of the Act on the basis of information that the assessee had made cash deposits in account held with the Bank. However, while completing the assessment u/s 147 r.w.s. 144B of the Act, the AO had finally the assessed income escaped the assessment only u/s 69A of the Act.

The Tribunal further noted the AO u/s 148A(d) of the Act for issuance of notice u/s 148 of the Act, and the assessment order passed u/s 147 r.w.s. 144B of the Act it was undisputedly clear that the AO had considered certain non-existing information for issue of notice u/s 148 of the Act.

The Tribunal opined that the information considered by the AO for the purpose of reopening of the assessment in light of provisions of section 149(1)(b) of the Act was not an information which suggests escapement of income which exceeds Rs. 50 lakhs or more so as to reopen the assessment beyond 3 years from the end of the relevant A.Ys.

The Tribunal rejected the argument that at the time of opening of the assessment, the AO is only required to consider prima facie, information which suggests escapement of income for issue of notice u/s 148 of the Act. The Tribunal opined that the prima facie information considered by the AO cannot be stretched to a non-existing information or incorrect information  Since the AO had considered the information flagged by the ITBA Portal which pertains to Bank A/c held by the assessee, before ascertaining the income escaped the assessment, the AO should have verified the relevant bank a/c statement which is the basis for reopening of the assessment beyond 3 years from the end of relevant A.Y.

Accordingly, the Tribunal held that the notice issued by the AO u/s 148 of the Actwas invalid and consequently, the assessment order passed by the AO u/s 147 r.w.s. 144B of the Act was void ab initio and was quashed.

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