Reopening of assessment concerning unexplained bank credits and share application money; notices set aside, AO permitted further lawful action

Reopening of assessment was contested in relation to unexplained credits in a bank account; the assessing officer examined a noncurrent investment recorded as share application money after the assessee denied dealing with identified entities, and the significance of whether the bank statement was uploaded on the designated portal was queried. The impugned notices and orders were set aside, with liberty granted to the assessing officer to take further steps in accordance with law.

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Issues: Whether the notices and order issued under Section 148A(b), Section 148A(d) and Section 148 of the Income-tax Act, 1961 (ie. the reassessment proceedings for AY 2019-20) are valid where the Assessing Officer shifted the basis of inquiry from alleged unexplained bank credits to unexplained investments without having sought explanation on that point in the original notice.

Analysis: The Court examined the materials and the sequence of communications between the parties. The notice under Section 148A(b) initially alleged unexplained credits in the petitioners bank account appearing to arise from transactions with specified entities. The Order under Section 148A(d) subsequently treated certain non-current investments (share application money in Mahavir Transmission Ltd.) as unexplained without any prior charge or request for explanation concerning such investments in the Section 148A(b) notice. The record demonstrated that the petitioner had filed bank statements on the designated portal and that the AO materially altered the scope of the inquiry after receiving the petitioners reply. The Court concluded that the AO had effectively shifted the goalposts by converting an allegation of unexplained bank credits into a distinct allegation of unexplained investment without first seeking explanation in respect of that investment in the initial notice. The Court also noted that the respondents, on instructions, did not press resistance to the petition once the actual record (including the uploaded bank statement) was examined.

Conclusion: The impugned notices and order under Section 148A(b), Section 148A(d) and Section 148 are set aside. The Assessing Officer is granted liberty to proceed further in accordance with law. The writ petition is disposed of accordingly in favour of the petitioner/assessee.

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