Court quashes tax order under Section 148, citing procedure violation. Petitioner's natural justice arguments upheld.

The court allowed the petition, quashing the impugned order and notice issued under Section 148 of the Income Tax Act, 1961. The court found that the reassessment proceedings were unsustainable due to the violation of the procedure prescribed under Section 148A(b) of the Act, as the revenue failed to provide the requisite material to the Petitioner. The Petitioner's arguments regarding the violation of natural justice principles were upheld, and the court directed the revenue to proceed from the stage of the notice under Section 148A(b) by supplying the necessary material.

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Issues Involved:
The judgment involves challenges to a notice under Section 148 of the Income Tax Act, 1961, a notice under Section 148A(b) of the Act, and an Order passed in terms of Section 148A(d) of the Act.

Challenge to Notice under Section 148 of the Act:
The Petitioner challenged the notice dated 26 March 2022 under Section 148 of the Income Tax Act, 1961, on the grounds that income liable to tax for the assessment year 2018-19 had allegedly escaped assessment. The basis for reopening was information received from credible sources regarding a transaction with BGR Construction LLP and a conveyance deed with Meet Spaces LLP. The Petitioner denied these transactions and demanded the proceedings be dropped. The assessing officer proceeded to record satisfaction based on cash payments to BGR Construction LLP and an unexplained conveyance deed with Meet Spaces LLP.

Procedure Under Section 148A(b) and Principles of Natural Justice:
The main ground of challenge was the alleged violation of the procedure under Section 148A(b) of the Act and principles of natural justice. The Petitioner argued that the material relied upon by the revenue was not provided, hindering the ability to respond effectively. The Petitioner cited a Supreme Court judgment emphasizing the need for providing information and material to enable a proper reply. The lack of material supplied, despite its availability with the assessing officer, was highlighted, rendering the Petitioner handicapped in responding to the notice.

Other Arguments Raised:
Additional arguments included the failure to obtain prior approval before issuing a clarification communication and the failure to conduct an inquiry as required under Section 148A(a) of the Act. However, the court focused on the violation of the procedure prescribed under Section 148A(b) due to the failure to provide requisite material. The court held that the reassessment proceedings were unsustainable based on this violation.

Judgment and Disposition:
The court allowed the petition, quashing the impugned order and notice. It was noted that the revenue could proceed from the stage of the notice under Section 148A(b) by supplying relevant material, subject to limitations. The writ petition was disposed of accordingly.

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