Reopening orders under Section 148A(b) and Section 148 set aside for assessing unmentioned Rs.14 lakh transaction beyond show-cause notice

HC set aside the reopening orders passed under Section 148A(b) and Section 148 because the Department assessed a Rs.14 lakh transaction that was not mentioned in either the original Section 148 notice or the subsequent Section 148A(b) notice. Relying on the SC principle that authorities cannot go beyond the show-cause notice, the court found the assessment prima facie unsustainable. The HC quashed the impugned orders while preserving the Department's right to pursue lawful remedies permitted by statute.

---

---

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 and order under Section 148A(b) of the Act, 1961.

Analysis:
1. The primary contention raised by the petitioner's counsel is that certain transactions considered by the authorities were not part of the original notice issued under Section 148 of the Act. The petitioner argues that excluding a specific transaction of Rs. 14 Lakhs would bring the total amount under assessment to less than 50 Lakhs, falling outside the purview of assessment proceedings as per a circular dated 11.05.2022.

2. The petitioner asserts that the authorities included the Rs. 14 Lakhs transaction made by a third party in the assessment, which was not part of the original notices issued. This lack of disclosure in the notice, according to the petitioner, renders the assessment invalid, citing the Supreme Court's ruling that the department cannot go beyond the show cause notice.

3. Referring to the circular dated 11.05.2022, the petitioner argues that excluding the Rs. 14 Lakhs transaction would reduce the escaped income to Rs. 36,99,555, below the threshold for initiating assessment proceedings. The petitioner contends that the assessment order under Section 148A(b) is unsustainable based on these grounds.

4. The court considered previous judgments, including one by the Bombay High Court, emphasizing the necessity of recording reasons for reopening assessments and limiting assessment to the reasons recorded. The court also cited a Division Bench ruling that the department cannot exceed the scope of the show-cause notice.

5. Based on the facts presented and the circular dated 11.05.2022, the court concluded that the orders under Section 148A(b) and Section 148 of the Act dated 22.07.2022 were not sustainable. Consequently, the court set aside the orders, allowing the writ petition and disposing of the case.

---