Same transaction cannot be subject matter of assessment under Section 147 twice

Same transaction cannot be subject matter of assessment under Section 147 twice; one by the ITO and the other by the DCIT – High Court 

In a recent judgment High Court quashed notice passed u/s 148 holding that same transaction cannot be subject matter of assessment under Section 147 twice; one by the ITO and the other by the DCIT.

ABCAUS Case Law Citation:
5089 (2026) (04) abcaus.in ITAT

Important Case Laws relied upon by Parties
VFPL ASIPL JV Company Vrs. Union of India, 2020

In the instant case, the Petitioner/assessee had approached the Hon’ble High Court against the Notice issued under Section 148 of the Income Tax Act, 1961 (the Act) rejecting the explanation offered by it.

The petitioner was a partnership firm. It was allotted two Permanent Account Numbers (say, PAN-1 and PAN-2). The firm had been furnishing returns under the provisions of the Act disclosing PAN-2 and never utilized PAN-1 in connection with its business activities.

However, due to inadvertence it disclosed PAN1 in certain banking transactions with the Bank, nonetheless, it requested the Bank to take out corrections in its records mentioning PAN-2.

A Notice was issued by the ITO to the assessee under Section 148A(b) of the Act with respect to said banking transactions to which response was furnished by the petitioner. Later, the ITO passed Order under Section 148A(d) in which after considering the reply and undertaking verification of the records, he assessed the income to NIL.

Two years later, another notice under Section 148A(1) qua PAN-1 for the relevant Assessment Year was issued to the assessee by the DCIT. The assessee submitted that on the advice of Commissioner a new PAN-2 being allotted, the returns had been filed, but the Bankers having not updated their system reflected PAN-1 in the alleged transactions. It was explained that the transactions in question were shown in the returns reflecting PAN-2.

However, the DCIT passed the Order under Section 148A(3) contemplating assessment of escaped income under Section 147 by issue of Notice under Section 148 of the Act.

The Hon’ble High Court observed that a cursory glance at impugned Notice issued under Section 148A(1) by the DCIT clearly showed that the same transaction with the Bank was the subject-matter in the assessment proceeding under Section 147 before the ITO. Therefore, it could be safely inferred that same transaction ought not to be have been subjected to re-verification by a different authority by undertaking assessment proceeding under Section 147. Not entertaining the present writ petition would ensue prejudice as for the same cause of action the petitioner has to engage itself again for the purpose of assessment.

The Hon’ble High Court noted that in the impugned order the DCIT had duly recorded that the issue was examined by the ITO but discarded the explanation offered by the assessee which shows arbitrariness and tainted with whimsical exercise of power stemming on the same provision(s) which had already been invoked by the ITO.

The Hon’ble High Court opined that for the same transaction relating to deposit of cash in Bank cannot be subject matter of assessment under Section 147 twice; one by the ITO and the other by the DCIT following legal maxim Nemo debet bis vexari pro una et eadem causa, meaning thereby, no man should be vexed twice over for the same cause would fit to the present context.

The Hon’ble High Court opined that when the assessment under Section 147 came to be concluded by the ITO by passing Assessment Order, the DCIT should not have rejected the explanation offered by the petitioner in response to Notice under Section 148A(1) for with respect to the same period and the same transaction treating it to be escaped income two assessments under same provision cannot be held tenable in the eye of law. The DCIT had initiated proceeding for assessment under Section 147 by issue of Notice under Section 148 by rejecting mechanically the explanation proffered by the petitioner in connection with the Notice without ascribing plausible reason.

The Hon’ble High Court further observed that a quasi judicial authority at a subsequent stage should not sit over the view expressed on facts in earlier assessment proceeding on the same subject matter adjudicated upon by another quasi judicial authority.

Accordingly, the Hon’ble High Court held that the petitioner cannot be subjected to assessment under Section 147 of the Act again. Ergo, the Order passed under Section 148(3) by the DCIT was quashed and set aside. As a consequence Notice u/s 148 was also set aside.

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