Assessee entitled to materials and fresh hearing; notice under section 148 quashed; sections 148A(b), 148A(d) invoked

HC allowed petition, finding the assessing officer failed to supply the information and material relied upon when issuing notice under section 148A(b). The HC quashed the order under section 148A(d) and the notice under section 148 of the Act, and remitted the matter to the assessing authority for fresh proceedings. The authority must supply all relevant materials relied upon, follow CBDT instructions and the controlling SC observations, and afford a proper opportunity of hearing before passing any fresh order.

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ISSUES PRESENTED AND CONSIDERED

1. Whether an order under Section 148A(d) and consequential notice under Section 148 can be sustained where the assessing officer failed to supply to the assessee the information and material relied upon with the show-cause notice under Section 148A(b).

2. Whether non-supply of relevant information and material with the Section 148A(b) notice violates the principles laid down by the Central Board of Direct Taxes (CBDT) guidelines and the procedural directions of the apex court regarding Section 148A, thereby vitiating the subsequent order under Section 148A(d).

3. Whether, in circumstances of non-supply of relied-upon material, the appropriate relief is quashing of the Section 148A(d) order and remittal for de novo consideration after providing the requisite material and opportunity to reply.

ISSUE-WISE DETAILED ANALYSIS - Issue 1: Validity of Section 148A(d) order where relied-upon material was not supplied with Section 148A(b) notice

Legal framework: Section 148A(b) functions as a show-cause stage in the reassessment process; the assessee must be furnished information/material on which the Revenue relies so that an effective reply can be furnished. Thereafter, the assessing officer may pass an order under Section 148A(d) deciding whether to proceed under Section 148.

Precedent Treatment: The Court applied the procedural directions of the apex court modifying earlier High Court orders to treat pre-amendment Section 148 notices as Section 148A(b) show-cause notices and requiring the assessing officer to supply relied-upon material within a specified timeframe, and then to pass orders under Section 148A(d) after offering a proper opportunity to the assessee.

Interpretation and reasoning: The Court found, on admission by departmental counsel, that the information and material relied upon were not supplied with the Section 148A(b) notice. That omission deprived the assessee of the opportunity to make an effective reply and amounted to denial of a proper hearing. The CBDT instructions mandating enclosure of relevant information and judicial authorities relied upon were emphasized as reflecting the required procedural norm.

Ratio vs. Obiter: Ratio - where the Revenue fails to supply the information and material relied upon with the Section 148A(b) notice, the resulting order under Section 148A(d) is vitiated for want of a proper opportunity to be heard. Obiter - observations stressing the applicability of CBDT guidelines as best practice in all cases under Section 148A.

Conclusions: The order under Section 148A(d) passed without supplying relied-upon material is invalid; the Section 148A(d) order must be quashed and the matter remitted for fresh consideration after supplying the material and providing an opportunity to the assessee to reply.

ISSUE-WISE DETAILED ANALYSIS - Issue 2: Effect of CBDT guidelines and apex court directions on procedural compliance for Section 148A(b)

Legal framework: Administrative instructions and judicial pronouncements inform the minimum procedural standard for issuance of a show-cause notice under Section 148A(b), especially the obligation to enclose relevant information, summaries of investigative inputs (appropriately redacted), details of enquiries, and judicial authorities relied upon.

Precedent Treatment: The Court relied on the apex court's modificatory directions which prescribed that assessing officers must furnish the information and material relied upon within a specified period to enable the assessee to reply, and thereafter pass orders under Section 148A(d) following due procedure.

Interpretation and reasoning: The CBDT guidelines and the apex court directions were treated as determinative of the procedural duty of the assessing officer. Failure to comply with those directions resulted in breach of procedural fairness and natural justice. The Court noted that even if prior authorization for enquiry under Section 148A(a) was dispensed with as a one-time measure in some contexts, the duty to disclose relied-upon material remains essential.

Ratio vs. Obiter: Ratio - procedural compliance with disclosure requirements (CBDT guidelines and apex court directions) is mandatory to afford a meaningful opportunity under Section 148A(b). Obiter - comments clarifying that previous procedural requirements for prior approval under Section 148A(a) may be dispensed with in certain circumstances, but not the disclosure obligation.

Conclusions: Non-compliance with CBDT guidelines and the apex court's directions as to furnishing relied-upon material invalidates subsequent action; such compliance must be observed on remittal before passing a fresh order under Section 148A(d).

ISSUE-WISE DETAILED ANALYSIS - Issue 3: Relief appropriate where procedural non-compliance is established

Legal framework: Judicial review remedies for denial of natural justice include quashing the impugned administrative order and remitting the matter for fresh consideration consistent with procedural directions and statutory requirements.

Precedent Treatment: Following the apex court's framework, challenged Section 148/148A(d) actions which were issued without adherence to substituted Section 148A procedure are to be treated as issued under Section 148A(b) and require supply of material and fresh orders consequently.

Interpretation and reasoning: Given the admitted failure to supply material and the clear mandate in the CBDT instructions and apex court pronouncement, the Court held that quashing the Section 148A(d) order and the Section 148 notice, and remitting the matter for fresh consideration, best vindicates procedural fairness while preserving substantive rights of both parties.

Ratio vs. Obiter: Ratio - when an assessing officer fails to supply relied-upon material and thereby denies an effective hearing, the correct remedial course is to quash the Section 148A(d) order and any consequential Section 148 notice and remit for fresh consideration after providing the required material and opportunity. Obiter - observations that defences under Section 149 and other rights of assessee and Revenue remain available on remand.

Conclusions: The appropriate relief is quashal of the Section 148A(d) order and accompanying Section 148 notice, with remittal to the assessing officer to supply all relevant material relied upon, permit the assessee to reply, and thereafter pass fresh orders in accordance with the statutory scheme and judicial directions.

Cross-references and Ancillary Observations

- Cross-reference: Issues 1-3 are interlinked; the non-supply of relied-upon material (Issue 1) implicates compliance with CBDT/appellate directions (Issue 2) and determines the remedy (Issue 3).

- Ancillary observation: Admission by the departmental representative that material was not supplied was a determinative factual finding supporting quashal and remittal.

- Procedural preservation: The Court recognized that all substantive defences available under the Act (including those under Section 149 and the Finance Act, 2021) remain open on remand; the decision addresses only procedural infirmity.

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