Reopening invalid; Section 148A(b) notice and PCCIT Section 151 approval defective for omitting Section 148A(d) items

The HC held the reopening invalid and ruled for the assessee, finding the Section 148A(b) notice and the PCCIT's Section 151 approval defective for failing to mention the first two items set out under Section 148A(d) (purchase and sale of penny-stock shares by related PANs), particularly where assessment orders on those items already existed and item 2 subsumed item 1. The omission demonstrated non-application of mind by the AO and PCCIT, rendering the reopening unjustified.

---

---

Issues Involved:
1. Reopening of assessment u/s 148 for AY 2016-17 based on alleged escapement of income from sale and purchase of shares of Penny Stock Company/shell companies.
2. Validity of second notice under Section 148A(b) alleging escapement of income during the pendency of reassessment proceedings.

For the first issue, the Petitioner, a non-filer of income tax return, received a notice u/s 148 of the Income Tax Act, 1961, for AY 2016-17, regarding alleged escapement of income from share transactions. The Assessing Officer found the Petitioner's submissions inadequate as supporting documents were not provided to substantiate claims. The AO concluded that income chargeable to tax had escaped assessment. Subsequently, an assessment order was passed under Section 147 read with Section 144B of the Act, which was challenged in an appeal before the CIT(A).

Regarding the second issue, during the ongoing reassessment proceedings, the Petitioner received a second notice under Section 148A(b) alleging escapement of income. The notice referred to transactions involving purchase and sale of shares, along with fictitious LTCG benefit by manipulation in share price. However, the notice lacked specific details on how income had escaped assessment and failed to address the duplication of information already covered in the previous reassessment order. The AO's decision to proceed with the reassessment without considering the information in the notice under Section 148A(b) was deemed to be a total non-application of mind. Consequently, the High Court quashed and set aside the impugned order dated 24th March 2023, along with the order passed under Section 148 of the Act.

---