Reassessment order travelling beyond Show Cause Notice quashed by High Court as assessee was not put on notice of the intended provision
In a recent judgment, the Hon’ble Madras High Court has quashed reassessment order passed u/s 147 of the Income Tax Act, 1961 (the Act) holding that show cause notice forms the foundation, if order traverses beyond Show Cause Notice, it is necessary that the petitioner is put on notice on the basis of which the order was intended to be made.
ABCAUS Case Law Citation:
4402 (2025) (02) abcaus.in HC
In the instant case, the Petitioner assessee had filed a Writ Petition filed under Article 226 of the Constitution of India, praying to quash the re-assessment order passed under Section 144 r/w Section 147 and 144C(3) of the Income Tax Act, 1961 (the Act) by the Assessing Officer (AO) and direct the AO to provide an opportunity to the petitioner to present its case before passing an assessment order.
It was submitted that that the show cause notice u/s 148 was issued as to why the capital gains that has accrued on account of sale of unlisted shares should not be taxed in terms of Section 112(1)(c)(iii) of the Income Tax Act. However, the order of assessment came to be passed on the premise that the above transactions are liable in terms of Section 112(1)(c)(ii) of the Income Tax Act. It is submitted that since the impugned order makes a departure from the show cause notice the petitioner were never in a position to putforth their objection as to how Section 112 (1)(c)(ii) of the Income Tax Act would not get attracted.
The Income Tax Department contended that the order impugned was an appealable order and the writ petition ought not to be entertained.
The Hon’ble High Court observed that existence of alternate remedy is not an embargo or an absolute bar to exercise power under Article 226 of the Constitution of India but a self-imposed restriction and the following circumstances viz., violation of principles of natural justice or lack of jurisdiction or error apparent on the face of the record are some of the exceptions carved out to the rule of alternate remedy for exercise of discretion under Article 226 of the Constitution of India.
The Hon’ble High Court stated that it is trite law that show cause notice forms the foundation, thus departure from Show Cause Notice or if order traverses beyond Show Cause Notice, it is necessary that the petitioner is put on notice on the basis of which the order was intended to be made. Else, as submitted by the learned counsel for the petitioner, the opportunity to reply becomes illusory and the notice would be an empty formality if the order is made on new / different grounds from the notice.
In view thereof, the Hon’ble High Court set aside the impugned order. It was directed that the assessee shall treat the impugned order as show cause notice and submit their objections along with the Email Id to which the future correspondence / communication must be sent. If any such objections are filed, the same shall be considered by the AO and orders shall be passed in accordance with law after affording a reasonable opportunity of hearing.
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