Ontents C
CHAPTER 1
INTRODUCTION
1.1 Legislative Background of Reassessment provisions 1
1.2 The new provisions 12
1.3 Memorandum explaining the amended provisions regarding reassessment 22
1.4 The provisions in brief 34
1.5 The changes 37
1.6 Propositions which may govern new law of reassessment also 42
1.7 Some propositions applicable to new law only
1.8 Conclusion
CHAPTER 2
REOPENING UNDER OLD LAW- BASIC PRINCIPLES
2.1 Introduction 44
2.2 Relevant provisions u/ss 147 to 151 44
2.3 Constitutional validity 46
2.4 Concept of assess, reassess, assessment, reassessment and recomputation 46
2.5 Guidelines set by Hon’ble Apex Court in GKN Driveshaft47
2.6 Conditions for Reopening of assessment 50
2.7 Nature of information received for reopening of assessment 51
2.8 The applicable law
2.9 Reasons for reopening
2.10 Limitation for reopening
2.11 Reopening barred by limitation
2.12 Certain expressions in section 147
2.13 The charge of escapement of income is necessary in a valid reopening 71
2.14 Subsequent material/development cannot justify reopening 72
2.15 Jurisdiction of the AO to issue notice u/s 148(1) 74
2.16 Issue and service of notice u/s 148(1)
2.17 Issuance of notice u/s 148
2.18 Sanction for issue of notice u/s 148
2.19 Objections and their disposal
2.20 The procedure for dealing with objections raised by the assessee 90
2.21 Principles governing reopening 91
2.22 Law relating to multiple issue of notices 94
2.23 Certain settled propositions in relation to reassessment proceedings 96
2.24 Conclusion
CHAPTER 3
REOPENING UNDER OLD LAW - SPECIFIC PROPOSITIONS
3.1 Introduction
3.2 Challenge to reopening
3.4 Reopening on borrowed satisfaction
3.5 Where reopening is based on non-application of mind by the AO 111
3.6 Independent inquiries by the AO after receipt of information 113
3.7 Where reopening is done on the basis of presumptions, suspicion, conjecture, and surmises 115
3.8 Reopening is based on change of opinion 116
3.9 Live link of information and tangible material with escapement of income 120
3.10 The proposition about live link of the material with the formation of belief as laid down by Hon’ble Apex Court in Lakhmani Mewal Das’s case 123
3.11 Existence of tangible material for formation of belief about escapement of income is also necessary in cases completed u/s 143(1)
3.12 Reopening is made on incorrect facts
3.13 Issue of notice u/s 148(1) issued on, or in respect of dead person/ non-existent entity and amalgamating company and proceedings thereafter
3.14 Changes by Finance Act, 2022
3.15 Impermissible considerations to reopen assessment completed u/s 143(3)
3.16
3.17
3.18 Reassessment without issue of notice u/s 143(2)
3.19 Addition of another item of escaped income
3.20 Reopening on account of bogus purchases
3.21 Additional claim for deduction/exemption in reassessment proceedings
3.22 Conclusion
CHAPTER 4
INCOME ESCAPING ASSESSMENT - SECTION 147
4.1 Introduction
4.2
4.3 Difference with old provision of section 147
4.4 Analysis of section 147 under new law
4.5 Difference between ‘reasons to believe’ under old law and ‘suggest’ under new law
4.6 Whether there will be any requirement of putting the material on record before issuance of notice u/s 148
4.7 What is the scope of expression “if any income chargeable to tax in the case of the assessee has escaped assessment for any assessment year”?
4.8 Conditions for invoking jurisdiction u/s 147
4.9 Whether section 147 can be invoked in following situations
4.10 Assessment of income in respect of new issue (under new law)
4.11 Whether whole assessment is open after issue of notice u/s 148
4.12 There is no bar in issuing multiple notices u/s 148
CONTENTS
4.13 Some important judicial propositions u/s 147 applicable under new law also 178
4.14 Whether concept of change of opinion would be applicable under new law 180
4.15 Whether writ could lie in respect of procedure laid down u/s 148A or in assumption of jurisdiction u/s 147 or issue of notice u/s 148 185
4.16 Conclusion 186
CHAPTER 5
ISSUE
OF NOTICE WHERE INCOME HAS ESCAPED ASSESSMENT - SECTION 148
5.1 Introduction 188
5.2 The new provision
5.3 The provision in brief
5.4 Amendment by Finance Act, 2022 191
5.5 Amendment by Finance Act, 2023 193
5.6 Conditions for issue and service of notice u/s 148 194
5.7 Guidelines by CBDT 196
5.8 Information 203
5.9 Meaning and scope of the expression “so far as may be” 218
5.10 Notice u/s 148A/148 can be issued by AO having jurisdiction only 218
5.11 Issuance of notice u/s 148 in different situations 219
5.12 Reassessment during reassessment pending under new law
5.13 Principles governing reopening and reassessment under the new law
5.14 Service of notices under Faceless Reassessment
5.15 Conclusion 223
CHAPTER 6
CONDUCTING
INQUIRY, PROVIDING OPPORTUNITY BEFORE THE ISSUE OF NOTICE U/S 148 - SECTION 148A
6.1 Introduction 224
6.2 The provision 224
6.3 The provision in brief 225
6.4 Charge of escapement of income in a notice u/s 148A(b) is necessary 227
6.5 Whether section 148A covers the concept of reasons recorded and procedure laid down by Hon’ble Apex Court in GKN Drive Shafts (India) Ltd. v. ITO
6.6 Application of procedure u/s 148A
6.7 Table to show where the procedure u/s 148A is required to be followed
6.8 Kind and scope of inquiries, AO can do u/s 148A(a)
6.9 Providing an opportunity to the assessee u/s 148A(b)
6.10 Number of notices u/s 148A(b), the AO can issue
6.11 Conditions inherent in issue of notice u/s 148A(b)
6.12 Notice u/s 148A(b), order u/s 148A(d) and notice u/s 148 should be in the same status and for the same assessee
6.13 Other propositions in respect of notices u/s 148A(b)
6.14 To consider the reply furnished by the assessee
6.15 Where no reply is furnished by the assessee
6.16 Passing of an order u/s 148A(d)
6.17 Nature of order u/s 148A(d)
6.18 Certain propositions where order u/s 148A(d) and consequential issue of notice u/s 148 are not upheld
6.19 Scope and relevance of the expression “material available on record”
6.20 Application of section 148A in survey cases
6.21 What should be the contents of the reply to notice u/s 148A(b)
6.22 Non-applicability of section 148A
6.23 Approval involved in search/requisition cases
6.24 Circumstances when notice issued u/s 148A(b) and/or order u/s 148A(d) is held invalid and its consequences
6.25 Some valid information under Explanation 1259
6.26 Explanation 1263
6.27 Service of notices under Faceless Reassessment
6.28 Conclusion
CHAPTER 7
IMPLICATION OF SECTION 135A IN REOPENING OF ASSESSMENT
7.1 Introduction
7.2 Section 135A
7.3 Various provisions covered in the scheme u/s 135A
7.4 Explanation 1 to section 148 and clause (d) of the proviso to section 148A
7.5 Consequential effect of section 135A on section 148A
7.6 Conclusion
CHAPTER 8
CONCEPT AND SCOPE OF DEEMED INFORMATION
8.1 Introduction
8.2 Deemed information under Explanation 2 to section 148
8.3 Contents of information for the purposes of section 148A/148
8.4 Dumb information
8.5 Dumb document
8.6 Whether deemed information as per Explanation 2 can also be dumb information
8.7 If no documents/assets are found in the search/requisition for any relevant assessment year, for which no escaped income can be attributed, whether the issue of notice u/s 148 or assuming
8.8 Assessment in respect of other issues
8.12 Consequence of deemed information on reopening and completion of assessment
8.13 Conclusion
CHAPTER 9
TIME LIMIT FOR NOTICE - SECTION 149
9.1 Introduction
9.2 The provision
9.3 Amendment by Finance Act,
9.4 Amendment by Finance Act, 2023
9.5 The provision in brief
9.6 The conditions for invoking clause (a) of section 149(1)
9.7 The conditions for reopening under clause (b) read with section 149(1A)
9.8 Concept and scope of “asset”- Explanation to section 149(1)
9.9 Concept and scope of word “expenditure”
9.10 Escaped Income in the form of entry or entries in the books of account
9.11 Implication of the First Proviso
9.12 Implication of the Second Proviso
9.13 Implication of the Third Proviso
9.14 Implication of the Fourth Proviso
9.15 Implication of the Fifth Proviso
9.16 Implication of the Sixth Proviso
9.17 Implication of change from ‘less than seven days’ to ‘does not exceed seven days’
9.18 Implication of the Explanation319
9.19 Computation of limitation to issue notice u/s 148 in non-search 320
9.20 Computation of Limitation in the case of search/requisition cases against the person searched or other person
9.21 Issue of notice u/s 148 in survey cases carried out as a consequence to search/requisition as per Fourth Proviso to section 149(1)
9.22 Implication of sub-section (1A)
9.23 Mechanism of operation of sub-section (1) and sub-section (1A) of section 149
9.24 Implication of sub-section (2)
9.25 Nature and scope of section 149(1)
9.26 The time limit for completing assessment/reassessment made under the new law 329
9.27 Meaning of expression “amounts to” or “likely to amount to”
9.28 Multiple notices u/s 148 and application of section 149
9.29 Important principles which can be applied to the new provisions of section 149
9.30 Cases where issuance of notice u/s 148 r.w.s. 149(1)(b) may not be upheld
9.31 Following kind of escaped income may not be brought to tax after three initial relevant Assessment Years by invoking section 149(1)(b)
9.32 Cases where issuance of notice u/s 148 r.w.s. 149(1)(b) may be upheld
9.33 Conclusion
CHAPTER 10
10.5 Source of books of account, documents or evidence for the purposes of section 149(1)(b)
10.6 Dumb document
10.7 Loose papers/documents/books seized/impounded in search/ survey should be relied upon as a whole
10.8
CHAPTER 11
11.5 Section 282 as amended by Finance (No. 2) Act, 2009 w.e.f. 01-10-2009
11.6 Addresses, as per Rule 127, at which service is to be affected
11.9 Difference in the law under section 282 as it existed prior to 1-10-2009 and thereafter
(multiple
11.16 Issue and service of notice u/s 148A
11.23
CHAPTER 12
CHAPTER 13
13.10 Prerequisites of sanction
13.11 Opportunity of being heard before approval
13.12 Non-Application of mind and mechanical approval
13.13 Incurable errors
13.14 Whether Assessee entitled to copy of approval/sanction order 437
13.15 The following kind of approvals/sanctions not upheld 438
13.16 Contrary view 439
13.17 Whether irregularity in granting approval is curable u/s 292B/ 292BB 440
13.18 Service of notices under Faceless Reassessment
CHAPTER 14
NOTICE DEEMED TO BE VALID UNDER CERTAIN CIRCUMSTANCES - SECTIONS 292B AND 292BB 14.1 Introduction
14.2 Section 292BB
14.3 Section 292B
14.4 Service of the notice u/s 148 and section 292BB
14.5 Issue of notice v. service of notice
14.6 Notice u/s 143(2), reassessment proceedings and section 292BB
14.7 Notice u/s 148A and section 292BB
14.8 Objection to issue and service of notice
14.9 At what stage one should raise the plea of non-service of notice 455
14.10 At what stage the question of service of notice u/s 148A(b) can be raised 455
14.11 Circumstances where section 292BB cannot be applied 456
14.12 Other situations concerning the application of section 292BB 457
14.13 Conclusion 459
CHAPTER 15
ASSESSMENT AND REASSESSMENT IN SEARCH, REQUISITION AND SURVEY CASES
15.1 Introduction
15.2 Assessment in search/requisition cases where search/requisition is initiated on or after 1-4-2021
15.3 Assessment in cases where survey u/s 133A is initiated on or after 1-4-2021
15.4 Bar for issuing notice u/s 148 for certain earlier years
15.5 Possible options in different years
15.6 Time limit for completing assessment/reassessment under new provisions 471
15.7 Amendment by Finance Act, 2022 472
15.8 Amendment by Finance Act, 2023
15.9 Ingredients of section 153A
15.10 Concept of relevant assessment year
15.11 Concept of “pending” u/s 153A
15.12 Concept of abatement
15.13 Various situations of abatement and completion of assessment
15.14 Relevance of incriminating material
15.15 The non obstante clause in sections 153A and 153C 488
15.16 The meaning of assess and reassess 490
15.17 Time limit for completion of assessment u/s 153A (search before 1-4-2018) 490
15.18 Assessment u/s 153C
15.19 Exclusion of time in handing over of the books
15.20
CHAPTER 16
REVISION OF REASSESSMENT ORDERS
16.1 Introduction 522
16.2 Ingredients of section 263 522
16.3 Amendment by Finance Act, 2022 524
16.4 Amendment by Finance Act, 2023 525
16.5 The power and function of the Commissioner in revision 526
16.6 The concept of “erroneous” 527
16.7 Concept of prejudicial to the interest of revenue 529
16.8 Revision of the assessment orders involving the issues in respect of cash deposits, receipts, investment and expenditure 531
16.9 Explanation 2 to section 263 535
16.10 Relevant propositions u/s 263 538
16.11
16.13 Doctrine of merger 548
16.14 No revision is permissible on marginal loss to Revenue 549
16.15 Limitation 550
16.16 Revision of order passed u/s 148A(d) 550
16.17 Revision of reassessment order for making addition on new issues 551
16.18 Revision of reassessment order by invoking Explanation 2 to section 263 552
16.19 Limitation 553
16.20 Various propositions on application of section 263 taken in reassessment 554
16.21 Application of above principles in the context of new reassessment procedure 555
16.22 Conclusion 556
CHAPTER 17 PENALTIES
17.1 Introduction 558
17.2 Nature of default and penalties 558
17.3 General principles for penalty proceedings/order 559
17.4 Section 271(1)(c) 561
17.5 Penalty u/s 271D 563
17.6 Penalty u/s 271E 575
17.7 Penalty u/s 271AAD 580
17.8 Penalty u/s 271AAC 592
17.9 Penalty u/s 271DA 594
17.10 Penalty u/s 271AAB 597
17.11 Penalty u/s 271AAE 604
17.12 Conclusion 606
CHAPTER 18
MISC. ESCAPED INCOME AND REOPENING UNDER NEW LAW
18.1 Introduction 607
18.2 Procedure followed under new law 608
18.3 Cash deposited in bank 609
18.28 Expenditure (on elections, temple constructions, foreign travels, school fees)
18.38 Unaccounted money received from developer 648
18.39 Unaccounted money paid by the developer 649
18.40 Expenditure found in electronics devices/loose sheets 650
18.41 Conclusion 651
CHAPTER 19
AGGREGATION OF ESCAPED INCOME U/S 149(1A)
19.1 Introduction 652
19.2 Rule of aggregation u/s 149(1A) 653
19.3 Possible inferences and defence 656
19.4 Whether escaped income in the form of asset can be clubbed with escaped income in the form of expenditure/entry to workout threshold limit provided u/s 149(1)(b) 658
19.5 Whether u/s 149(1A) aggregation is done only in respect of outexpenditure (in relation to an event or on an occasion) or whether such aggregation can be done both for asset and expenditure put together 660
19.6 Whether AO can stop if aggregation comes to ` 50 lakhs and thereafter does not identify other items of asset or expenditure? 661
19.7 Conclusion 661
CHAPTER 20
VALIDITY OF NOTICES ISSUED
U/S 148 AFTER 01-04-2021
UNDER THE OLD LAW
20.1 Introduction
20.2 Extension of due dates
20.6 The decision of the High Courts 667
20.7 SLP of the Revenue 671
20.8 The procedure to be followed as per Ashish Agarwal’s case (supra) 672
20.9 Analysis of section 149(1) of new law providing time limit for issue of notice u/s 148 673
20.10 Defence available to the taxpayer 675
20.11 Instructions issued by the CBDT 678
20.12 Comments
20.13 The gist of above Instructions
20.14 Conclusion
CHAPTER 21
RESPONSE TO THE NOTICES UNDER NEW LAW
21.1 Introduction 690
21.2 Pre-notice procedure followed by the Department 690
21.3 Evaluation of notice u/s 148A(b) by the assessee 696
21.4 Further checking by the assessee before furnishing reply 698
21.5 Contents of the reply u/s 148A(b) 700
21.6 Evaluation by the assessee after the receipt of order u/s 148A(d) and notice u/s 148 701
21.7 Challenge to notice u/s 148 issued under new law 702
21.8 Writ may not be allowed in following circumstances 703
21.9 Conclusion 715
CHAPTER 22
DEVELOPMENTS SUBSEQUENT TO ASHISH AGARWAL’S CASE
22.1 Introduction 716
22.2 The decision in Touchstone Holdings (P.) Ltd. v. ITO717
22.3 The decision in Nutan Bhusan Jena v. PCIT718
22.4 The decision in Ashok Kumar Agarwal v. UOI719
22.5 The decision in Ved Prakash Mittal’s case 721
22.6 The decision in Salil Gulati v. ACIT722
22.7 The decision in Rajeev Bansal v. UOI722
22.8 The decision in Keenara Industries (P.) Ltd. v. ITO725
22.9 Other decisions following Ashish Agarwal’s case 729
22.10 Considering the background cases and above judgments, entire development can be summed up 736
22.11 issued under old law between 01-04-2021 to 30-06-2021 738
22.12 The AO can drop notices u/s 148 issued under old law during the period between 01-04-2021 to 30-06-2021 and issue fresh notices under new law 738
22.13 A Possible different view 739
22.14 Possible scenario for issue of notice u/ss 148A(b) and 148 during FYs 2022-23 and 2023-24 742
22.15 Conclusion 743
CHAPTER 23 ENHANCEMENT IN REASSESSMENT
23.1 Introduction 744
23.2 The power of CIT(A) falling within the scope of enhancement 744
23.3 Limitation on the power of enhancement of CIT(A) 745
23.4 Power of enhancement of CIT(A) in reassessment order under old law 747
23.5 Enhancement in reassessment u/s 153A/153C 749
23.6 Enhancement in reassessment made under Explanation 1 and under Explanation 2 (in respect of survey) to section 148 under new law 751
23.7 Enhancement in reassessment made under Explanation 2 to section 148 (other than survey) under new law 752
23.8 Conclusion 753
23.9 Introduction 754
23.10 The provisions 754
23.11 Whether Tribunal has power of enhancement? 757
23.12 Power of enhancement in Proviso to section 254(2) 757
23.13 Analysis of the above Proviso 758
23.14 Scope of word “assessment” in the Proviso to section 254(2) 758
23.15 Power of conversion of income assessed under one head into another 758
23.16 The consequence of lack of power of enhancement 759
23.17 Conclusion 760
CHAPTER 24
THEORY OF ‘TRAVEL BACK IN TIME’
24.1 Introduction 761
24.2 The Concept
24.3 Relaxation Act, 2020
24.4 762
24.5 The issues arising
24.6
24.7 Conclusion
CHAPTER 25
AMENDMENT BY FINANCE (NO. 2) ACT, 2024
25.1 Introduction 769
25.2 Memorandum explaining the new scheme of reassessment 769
25.3 The Scheme in brief 772
25.4 Section 147 773
25.5 Section 148 774
25.6 Section 148A 778
25.7 Section 149 782
25.8 Section 151
25.9 Section 152
25.10 New Reassessment provisions in brief 789
25.11 Comparative chart of the law of reassessment existing on or before 31-03-2021, existing between 01-04-2021 and 31-08-2024 and proposed w.e.f. 01-09-2024
25.12 Following propositions held in respect of law existing between 01-04-2021 till 31-08-2024 will also be applicable in respect of law effective from 01-09-2024 798
25.13 Conclusion 800
CHAPTER 26
Old law v. New law 802
Scope of section 147 802
Scope of section 148A 803
To issue Fresh Notice u/s 148A(b), if earlier Notice is Defective 807
Jurisdiction of the AOs Conducting Proceedings u/s 148A and issuing Notice u/s 148 809
Scope of section 148 810
Issue of Notice u/s 148 in Faceless Assessment Scheme 811
Scope of Explanation 1 to section 148 811
Time limit for Utilizing Information for Reopening of Assessment under new law 815
Not enclosing order u/s 148A(d) with the Notice u/s 148
CHAPTER
CONDUCTING INQUIRY, PROVIDING OPPORTUNITY
BEFORE THE ISSUE OF NOTICE
U/S 148 - SECTION 148A1
6.1 Introduction
It has been experienced in the past that notice u/s 148 used to be issued simply on any kind of information received by the AO, or on the recommendation of other authorities/agencies without applying his own mind as to whether material available before him had a live link with the escapement of income and consequently with the formation of belief. It was also felt that objections raised by the assessee against reasons recorded or on the formation of belief were used to be brushed aside by the AO on frivolous grounds or simply by passing a non-speaking order. As a result, the reopening used to be quashed by the appellate authorities on various grounds such as there is non-application of mind by the AO, notice u/s 148 being issued on borrowed satisfaction, there is no live link between material available on record, and formation of belief, or there were issues relating to limitation not considered by the AO. Thus, to simplify and strengthen the reopening, the Finance Act, 2021 introduced a new section 148A after section 148, apparently to ensure the opening of completed assessment on sound footings. To achieve this aim, the legislature has not only incorporated the principles laid down by Hon’ble Apex Court in GKN Drive shafts (India) Ltd. v. ITO1a but also made it necessary for the AO to seek approval of senior authority before deciding to issue notice u/s 148 so that technical issues involved in reopening are taken care of. In this chapter, the provisions of section 148A are described in brief with different kind of implications.
6.2
The provision
Conducting inquiry, providing opportunity before the issue of notice u/s 148.
1.This provision is applicable only in those cases where order u/s 148A(d) has been passed or notice u/s 148 has been issued on or before 31-08-2024 in view of new scheme of reassessment introduced by Finance (No. 2) Act, 2024 and as provided in section 152 of the Act. Detailed discussion in respect of this new scheme is provided in Chapter No. 25.
1a.[2002] 125 Taxman 963 (SC)
CONDUCTING INQUIRY, PROVIDING OPPORTUNITY 225
“Section 148A
Conducting inquiry, providing opportunity before issue of notice u/s 148
“148A. The Assessing Officer shall, before issuing any notice u/s 148, —
(a) conduct any enquiry, if required, with the prior approval of specified authority, with respect to the information which suggests that the income chargeable to tax has escaped assessment;
(b) provide an opportunity of being heard to the assessee, by serving upon him a notice to show-cause within such time, as may be specified in the notice, being not less than seven days and but not exceeding thirty days from the date on which such notice is issued, or such time, as may be extended by him on the basis of an application in this behalf, as to why a notice u/s 148 should not be issued on the basis of information which suggests that income chargeable to tax has escaped assessment in his case for the relevant assessment year and results of enquiry conducted, if any, as per clause (a);
(c) consider the reply of assessee furnished, if any, in response to the showcause notice referred to in clause (b);
(d) decide, on the basis of material available on record including reply of the assessee, whether or not it is a fit case to issue a notice u/s 148, by passing an order, with the prior approval of specified authority, within one month from the end of the month in which the reply referred to in clause (c) is received by him, or where no such reply is furnished, within one month from the end of the month in which time or extended time allowed to furnish a reply as per clause (b) expires:
Provided that the provisions of this section shall not apply in a case where,—
(a) a search is initiated u/s 132 or books of account, other documents or any assets are requisitioned u/s 132A in the case of the assessee on or after the 1st day of April, 2021; or
(b) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any money, bullion, jewellery or other valuable article or thing, seized in a search u/s 132 or requisitioned u/s 132A, in the case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or
(c) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner that any books of account or documents, seized in a search u/s 132 or requisitioned u/s 132A, in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee; or
(d) the Assessing Officer has received any information under the scheme notified u/s 135A pertaining to income chargeable to tax escaping assessment for any assessment year in the case of the assessee.
Explanation.—For the purposes of this section, specified authority means the specified authority referred to in section 151.
6.3 The provision in brief
Before the issue of notice u/s 148, in certain cases, the AO has to take following steps-
CONDUCTING INQUIRY, PROVIDING OPPORTUNITY
(i) To examine the information as to whether it fulfils the conditions of section 147.
(ii) To conduct inquiries, wherever required.
(iii) Such inquiry has to be in respect of information which suggests that income chargeable to tax has escaped assessment.
(iv) After carrying out inquiries, the AO has to provide an opportunity of being heard to the assessee.
(
v) For this purpose, he has to issue a show-cause notice asking the assessee to explain as to why notice u/s 148 be not issued against him (a) on the basis of information which suggest that income chargeable to tax has escaped assessment and (b) and on the basis of result of inquiries, if any conducted by him.
(vi) He has to give a minimum time not exceeding 7 days but not more than 30 days to the assessee for furnishing his explanation
(vii) He may extend the time for furnishing the explanation on an application made by the assessee in this behalf.
(viii) To consider the reply, if any, submitted by the assessee in respect of show-cause notice.
(ix) To decide on the basis of material available on record, including the reply furnished by the assessee, whether it is a fit case for the issue of notice u/s 148 or not.
(x) Such decision has to be made by passing an order (in writing).
(xi) This order has to be passed within one month from the end of the month in which time or extended time allowed to the assessee to furnish the reply expires.
(xii) Prior approval of the specified authority has to be taken before passing such an order.
(xiii) The above procedure of carrying out inquiries, issuing show-cause notice and passing order u/s 148A (d) is not required to be followed in the following cases-
i. In cases of searches carried out u/s 132(1) on or after 1-4-2021.
ii. In requisition cases u/s 132A, where books of account or other documents or assets are requisitioned on or after 1-4-2021.
iii. In search/requisition cases where the AO is satisfied with the prior approval of PCIT/CIT that money, bullion, jewellery or other valuable article or thing seized in the search/requisition (against person searched) carried out after 1-4-2021, or requisitioned u/s 132A after 1-4-2021 belongs to “other person”.
iv. In search/requisition cases where the AO is satisfied with the prior approval of PCIT/CIT that books of account or documents
CONDUCTING INQUIRY, PROVIDING OPPORTUNITY 227
seized in the search/requisition (against person searched) carried out on or after 1-4-2021 or requisitioned u/s 132A on or after 1-4-2021 pertains to or pertain to, or any information contained therein relates to the “other person”.
v. Where information is received in a scheme framed by the Government u/s 135A.
(xiv) Specified authority for the purposes of this section is the authority referred to in section 151.
6.4 Charge of escapement of income in a notice u/s 148A(b) is necessary
Necessity of Specific Allegation in Notice: The notice issued u/s 148A must contain information that income chargeable to tax has escaped assessment. There must be some material supporting allegation of escapement of income. A bald assertion about the escapement of income is not sufficient to validate the issuance of notice u/s 148A.
Insufficiency of Mere Transactions as Evidence: Therefore, wherever AO receives information about a transaction such as cash deposited in a bank, the mere fact of deposit of cash will not lead to an inference that cash so deposited was of income character and that it was chargeable to tax in the hands of the assessee in the relevant assessment year. The inference of the AO that an income equal to a deposit in the bank has escaped assessment of income, proceeds on the fallacious assumption that the bank deposits constitute undisclosed income and overlooks the fact that the sources of deposit need not necessarily be an income of the assessee. The AO has to put up some more material after carrying out inquiries that the cash deposits may be an undisclosed income of the assessee and hence income chargeable to tax has escaped assessment2
Prohibition Against Reopening for Mere Verification: Thus, no reopening is permissible merely for verifying the source of cash deposited in the bank particularly when AO did not contend that said cash deposits were not reflected in the return of income3. The verification part must be done before issuing SCN u/s 148A.
Requirement of Allegation and Material Substantiation: So also, reopening only on the basis that there are huge cash withdrawals towards purchases and the SCN (reasons recorded earlier) did not indicate that any income chargeable to tax has escaped assessment cannot be sustained4. If there is no allegation and material substantiating that income chargeable to tax has escaped assessment provided to the assessee alongwith notice u/s 148A(b),
2. Based on Bir Bahadur Singh Sijwali v. ITO [2015] 53 taxmann.com 366 (Delhi - Trib.); Amrik Singh v. ITO [2016] 70 taxmann.com 26 (Amritsar - Trib.); Gurpal Singh v. ITO [2016] 71 taxmann.com 108 (Amritsar - Trib.)
3. Sunrise Education Trust v. ITO [2018] 92 taxmann.com 74 (Guj.)
4. ITO v. Amit K. Shah [2016] 71 taxmann.com 256 (Ahd. - Trib.)
CONDUCTING INQUIRY, PROVIDING OPPORTUNITY
and/or there is no quantification of escaped income, in the notice u/s 148A(b), passing of order u/s 148A(d) or issue of notice u/s 148 will not be valid5
Duty of AO to Examine the Information: When information about cash deposited in a bank is received by the AO, it is his duty to examine whether said cash deposit is reflected in return or not. Without examining the information about cash deposit as to whether it reflects income chargeable to tax or not, reopening will not be justified6. Now even the issue of notice u/s 148A (b) may not be justified.
Consideration of Assessee’s Explanation: Issuing notice u/s 148 cannot be sustained when the explanation of the assessee that the source of cash deposit post demonetisation was a withdrawal of cash from the same bank and the withdrawals and deposits closely matched were not considered by the AO7
Charge of Escapement in Cases of Recomputation: Even in cases where recomputation is required on account of grant of excessive depreciation allowance, loss, deduction, or relief, the charge of escapement of income would be necessary for acquiring jurisdiction u/s 147.
6.5 Whether section 148A covers the concept of reasons recorded and procedure laid down by Hon’ble Apex court in GKN Drive shafts (India) Ltd. v. ITO8
Under the new law, there is no requirement anymore for recording reasons, supplying them to the assessee, inviting objections from him, and passing an order disposing of such objections before proceeding to make reassessment. Such procedure has been practically incorporated in section 148A which provides that, before the issue of notice u/s 148, the AO is required to carry out inquiries u/s 148A, if required, with prior approval of specified authority, provide an opportunity of being heard, consider the reply furnished by the assessee to the show cause notice issued by the AO and pass an order u/s 148A (d) with prior approval of specified authority within the time limitation provided thereunder. Thus, if an assessee has objection as to whether (i) there is an income chargeable to tax (ii) such income has escaped assessment, or (iii) any recomputation of loss, depreciation allowance, or any other allowance or deduction is required (iv) AO has correctly assumed jurisdiction to issue notice u/s 148, (v) a particular issue on which ld. AO intends to issue notice u/s 148 is covered in appeal, reference, or revision, he can raise such objections in the reply to be furnished in response to show-cause notice issued u/s 148A(b). Thus, order u/s 148A(d) would have all the trappings of reasons recorded, objections raised by the assessee, and disposal of such objections through speaking order which is required to be enclosed with the notice u/s 148.
5. Bikash Dev v. DCIT [2023] 102 ITR (Trib) 701 (ITAT - Ctk)
6. CIT v. Indo Arab Air Services [2015] 64 taxmann.com 257 (Delhi)
7. Based on Swati Malove Divetia v. ITO [2018] 98 taxmann.com 447 (Guj.)
8. [2002] 125 Taxman 963 (SC)
6.6 Application of procedure u/s 148A
The procedure laid down u/s 148A is applicable in following two circumstances. They are-
(i) When AO receives information, which falls within Explanation 1 to section 148. It is mentioned in the Explanation 1 that for the purposes of issuance of notice u/ss 148 and 148A, the information with the AO which suggests that income chargeable to tax has escaped assessment means (i) the information which is received in the case of the assessee for the relevant assessment year as per Risk Management Strategy formulated by the CBDT from time to time and (ii) audit objection to the effect that assessment in the case of the assessee for the relevant assessment year has not been made in accordance with the provisions of the Act. (iii) information received as per agreements u/s 90/90A. (iv) information received under a scheme framed by the Government u/s 135A and (v) information contained in an order of Court/Tribunal. This procedure is to be followed for all ten relevant assessment years.
(
ii) Where survey operation is carried out u/s 133A, in case of the assessee on or after 1-4-2021. Even though carrying out a survey is treated as deemed information with the AO which suggest that income chargeable to tax has escaped assessment in the case of the assessee, but procedure laid down u/s 148A has to be followed for all the ten years including three initial relevant assessment years.
It may be noted that the procedure laid down u/s 148A will not be applicable in cases of search and requisitions carried out on or after 1-4-2021 in the cases of “person searched” and in the cases of “other person” as covered in Clauses (a), (b) and (c) of Proviso to section 148A.
6.7 Table to show where the procedure u/s 148A is required to be followed:
Following table shows in which cases procedure u/s 148A is required to be followed:
149(1)(a)
Section Limitation to issue notice u/s 148
Three initial RAYrs
Explanation 1 to section 148 except clause (iv) thereof Clause (iv) of Explanation 1 to section 148
Explanation 2 to section 148 (deemed information)
SurveysearchRequisition Search/requisition-other person
Provided AO is satisfied with prior approval of PCIT/CIT on conditions in clauses ( iii ) and (iv)
149(1)(a)
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Section Limitation to issue notice u/s 148
Explanation 1 to section 148 except clause (iv) thereof
Clause (iv) of Explanation 1 to section 148
Explanation 2 to section 148 (deemed information)
SurveysearchRequisition Search/requisition-other person
Whether procedure u/s 148A is required to be followed
149(1)(b) From fourth to Tenth RAYrs
Whether procedure u/s 148A is required to be followed
6.8 Kind and scope of inquiries,
AO can do u/s 148A(a)8a
Section 148A(a) gives power to the AO to conduct any inquiry, if required, with prior approval of specified authority, with respect to the information which suggest that the income chargeable to tax has escaped assessment. Such inquiries can be carried out u/s 148A(a) in respect of the information covered in Explanation 1 of section 148 (except clause (iv) thereof) and in respect of survey cases. These inquiries may be-
(i) Verification from own records of the assessee.
(ii) Verification from other AO.
(iii) Verification with various statutory statements filed by the assessee and other taxpayers.
(iv) Verification from other Departments such as GST, SEBI.
(v) Verification from books of accounts by summoning books.
(vi) To exercise power u/s 131(1) read with sub-section (2) to collect information, to record statements, to compel the production of books or other documents, or to issue commissions.
(vii) Verification from other taxpayers u/s 133(6) or by summoning them and recording their statements.
(viii) Collecting other information in terms of section 133, sub-section (1) to sub-section (5).
(ix) Collection of data from banks and other financial institutions.
(x) Downloading data from MCA/ROC/SEBI portals.
8a. As per new scheme of reassessment introduced by Finance (No. 2) Act, 2024, no inquiries are required to be carried out under new section 148A and a notice u/s 148A(1) on the basis of information, which suggest that income chargeable to tax has escaped assessment, can be issued by the AO on or after 01-09-2024.
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(xi) Carrying out survey u/s 133A at the premises of the assessee or other taxpayers for verifying or supplementing the information.
(xii) Invoking power u/s 133B for collecting certain information.
(xiii) Invoking power or taking assistance u/s 133C.
(xiv) Invoking power u/s 134 to inspect registers of certain companies.
(xv) Asking the investigation wing to collect information/carry out inquiries to supplement information received under Explanation 1 to section 148.
All the above steps/actions/procedures are part of inquiries. Even verification with the assessee’s records is an inquiry.
6.8-1 Scope of inquiries u/s 148A(a)
An inquiry should be confined to the domain of information and should not be extended to the issues not arising from the information. The inquiry should be specific. Even though there are no fetters on the power of the AO to carry out preliminary inquiries (before the issue of notice u/s 148 under old law as held in Aishwarya Dying Mills (P.) Ltd. v. DCIT9), but under the new law, as envisaged u/s 148A(a), inquiries are restricted to what arises from the information and for every kind of inquiry, he has to seek approval from the specified authority.
6.8-2 Extent of inquiries is within discretion of AO
So far as inquiries u/s 148A(a) is concerned assessee has no role to play. It is for the AO to decide on the basis of information under Explanation 1 or Explanation 2(ii) to section 148 as to what kind of inquiries he has to carry out so that all the elements of escapement of income are brought on record before issue of show-cause notice u/s 148A(b). These inquiries by the AO are apparently independent inquiries behind the assessee. However, the AO is duty bound to disclose the contents of information and results of inquiries to the assessee in a show-cause notice issued u/s 148A(b). In response to this assessee can ask to produce his witness as there is no restriction as to the extent and manner of reply. Assessee can also ask to allow cross examination of witness if charge in show-cause notice is based on statement of a witness. If such cross examination is demanded by the assessee and is not allowed by the AO, the reopening of the assessment may be held as bad in law.10 Assessee can also ask the AO to allow personal hearing before deciding to issue notice u/s 148.10a
6.8-3 Approval for general/open inquiries
As per Finance Act, 2022 no approval for inquiries u/s 148A(a) is required. Thus, AO has been given free hand to carry out inquiries to collect mate-
9. [2018] 94 taxmann.com 430 (Guj.)
10. CIT v. Pradeep Kumar Gupta [2008] 303 ITR 95 (Delhi)
10a. Studio Virtues v. ITO [2023] 156 taxmann.com 94 (Gujarat).
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rial and evidence about escapement of income before issue of notice u/s 148A(b).
It is possible to interpret the phrase, “the AO shall…. Conduct any inquiry” to cover the carrying out of inquiries through other officers of the Department as the scope of this phrase may not be restricted to merely carrying out inquiries by self and not taking assistance of other Departmental officers. When an inquiry is carried out through an inspector, it is the inquiry through others. Therefore, inquiry through other officers would also be covered in the above phrase.
When information is received as per Explanation 1 to section 148, or deemed information under Explanation 2 (ii), any further mention of facts, in the show cause notice issued u/s 148A(b), other than those contained in the information received as per Explanation 1 would mean that the AO has carried out inquiries as a result of which further facts have been collected. The collection of additional facts other than those mentioned in the information cannot be done without the approval of the specified authority. The AO is required not only to send the information proper along with show cause notice but also the additional facts as collected on inquiries to the approving authority for seeking approval to issue SCN.
6.8-6 Examples—
6.8-6-1 About Explanation 1(i) of section 148(i) Cash deposit in the bank:
Information as per clause (i) of Explanation 1 to section 148 is that assessee ‘X’ in his bank account xxxxxxxxx1234 in …………. Bank, made a deposit of ` 25 lakhs in cash during the FY 2021-22.
In this information, the name of the assessee, the relevant financial year, and the amount of deposit are mentioned. Further, information required is whether it is chargeable to tax or not. For this purpose, he needs to (i) collect bank statement for the relevant year (ii) verify the return of income of the assessee for the relevant year, as to whether the bank account is disclosed (iii) to send the inspector to verify from the books of account of the assessee whether the deposit of cash is entered in the books and what is the nature of such receipts.
It is for the assessee, in response to show-cause notice issued u/s 148A(b) to explain with evidence the nature of the deposit, whether it constitutes exempted income or is a sale proceed, etc.
(ii) Purchase of property:
Information is received that assessee has purchased a property for a sum of ` 5 crores. Further facts required are, when the property was purchased,
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whether it is residential or commercial, what is the source of investment, and whether such investments are accounted for. Then inquiries required to be carried out are to find out (i) location of property (ii) identification of seller (iii) whether declared in the return of income (iv) whether declared as business property or house property, (v) if house property, whether income there from is declared, (vi) what is the investment declared in the return. For collecting these facts inquiries required are (i) verification of return (ii) collecting bank statement declared by the assessee in the return (iii) collecting data/deed from Registrar of properties. They are sufficient to issues how cause notice and to decide whether it would be a fit case to issue notice u/s 14811.
(iii) Assessee being beneficiary of accommodation entries:
The information received from the investigation wing through RMS that the assessee has obtained accommodation entries from Mr. ‘X’ as revealed in the search/survey against Mr. ‘X’ and his companies and the assessee is one of the beneficiaries. For fortifying the inference that the assessee has paid unaccounted cash and obtained accommodation entries by way of loan/share application money from a company of Mr. ‘X’, information required would be (i) a statement/document linking the assessee as a beneficiary (ii) bank statement of investing/lender company (iii) the assessment orders of the investing/lender companies (iv) verification from SEBI, whether investing/lender company are declared as shell companies. The verification/inquiries can be done through the investigation wing to obtain the above documents and from the bank of the lender/investing company to obtain a bank statement to know whether any cash was deposited therein12.
(iv) Receipt of information as contained in the charge sheet filed by CBI:
Information received (through RMS) that as per the charge sheet filed by CBI assessee has received certain share application money at a high premium from his blood brother. In such a case there is no need to carry out further inquiries u/s 148A(a) as the charge sheet itself provides, (i) amount of share premium (ii) relevant assessment year (iii) unaccounted money (bribe money) involved in this transaction. The AO can issue show-cause notice u/s 148A(b) without carrying out inquiries u/s 148A(a)13.
11. Smt. A. Sridevi v. ITO [2018] 100 taxmann.com 434 (Mad.)
12. Kottenz India Manufacturing (P.) Ltd. v. DCIT [2018] 95 taxmann.com 291 (Guj.); Etiam Emedia Ltd. v. ITO [2019] 101 taxmann.com 231 (MP); MSK Real Estates (P.) Ltd. v. DCIT [2018] 95 taxmann.com 241 (Guj.); Khatu Shyam Processors (P.) Ltd. v. DCIT [2018] 94 taxmann.com 429 (Guj.); Peass Industrial Engineers (P.) Ltd. v. DCIT [2016] 73 taxmann. com 185 (Guj.)
13. Dayanidhi Maran v. ACIT [2018] 98 taxmann.com 202 (Mad.); South Asia FM Ltd. v. ACIT [2018] 98 taxmann.com 200 (Mad.)
CONDUCTING INQUIRY, PROVIDING OPPORTUNITY
(v) Receipt of unaccounted profit from the firm:
Information received through RMS that there has been distribution of unaccounted money by the firm to the retiring partner. Such information can come as T.E.P. but it has to be routed through RMS for becoming information as per Explanation 1. Once received by the AO, it requires inquiries which can be done through the investigation wing, which can exercise its power to record the statement of other partners and collect evidence, whether the firm had unaccounted profit which was distributed among partners. For carrying out these inquiries the AO has to seek approval from the specified authority u/s 148A(a)14
(vi) Case of bogus purchases:
Information received through RMS that the assessee had made huge bogus purchases to suppress profits, the AO is expected to carry out preliminary inquiries u/s 148A(a) such as (i) verification of the return to know purchases shown in the relevant previous year (ii) whether huge credits in the balance sheet are existing in the name of sellers (iii) profits and rates of the profit shown in earlier years (iv) if the name and address of the seller is available, then verification from the record of such sellers as to how he could have made sales to the assessee (v) his source of purchases (vi) his financial position to make big purchases and then sale to assessee (vii) movement of stock. Thus, two kinds of inquiries are required (i) verification from the record of the assessee and (ii) inquiry through the investigation wing or directly by the AO either u/s 133A or u/s 13115
(vii) Receipt of information about a bank account in a foreign country:
The Assessing Officer received information from the Investigation Wing, through RMS that the assessee had operated an undeclared account with HSBC Bank located in Switzerland and carried out unaccounted transactions and made deposits in them during the relevant assessment years. The preliminary inquiries u/s 148A(a) required may be(i) verification from the return of income about the existence of any bank account in a foreign country (ii) calling for bank statements of declared bank accounts of the assessee and family members and to find out expenses on foreign visits or receipt of money on the transfer of funds from foreign countries, either in his account or in the account of his family members. (iii) examination of passport of the assessee and family members as to how many times they have visited Switzerland. (iv) where interest is paid by foreign banks, whether such interest is declared in the return16
14. “Atul Ratilal Makadia v. ITO [2018] 94 taxmann.com 435 (Guj.)”
15. PCIT v. Paramount Communication (P.) Ltd. [2017] 79 taxmann.com 409 (Delhi); Choksi Vachharaj Makanji & Co. v. ACIT [2016] 76 taxmann.com 17 (Guj.)
16. Pradeep Dayanand Kothari v. ACIT [2016] 69 taxmann.com 408 (Chennai - Trib.); Ambrish Manoj Dhupelia v. DCIT [2017] 87 taxmann.com 195 (Mum. - Trib.)
