In a recent ruling, the Madras High court ruled that a new Show Cause Notice ( SCN ) under Section 148 of the Income Tax Act, 1961 shall be issued for the issues not previously raised. The department was directed to issue a fresh order under Section 148A(d) after considering the reply of the assessee.
A Single bench of Justice Senthilkumar Ramamoorthy ruled that “Because the impugned order raised an issue not previously raised in the show cause notice, it becomes necessary for the respondents to issue a fresh show cause notice calling for an explanation with regard to all issues that warrant issuance of a notice under Section 148 of the Income Tax Act.”
The petitioner, Annam Rajasekher Bindu initially received a notice dated 28.02.2023, under Section 148A(b) of the Income Tax Act, seeking them to show cause as to why a notice under Section 148 should not be issued regarding specified transactions.
Representing the petitioner, learned counsel raised three primary objections to the impugned order. Firstly, it was argued that the notice issued under Section 148A(d) relied solely on information sourced from the Insight Portal, which, according to legal precedent cited, cannot be the exclusive basis for such notices. Secondly, it was contended that there existed no direct linkage between the information sourced and the alleged income evasion, a prerequisite for initiating proceedings under Section 148. Lastly, it was asserted that the impugned order made findings on issues not raised in the original show cause notice, denying the petitioner a fair opportunity to respond.
In response, Dr. Ramasamy, representing the respondents contended that the order contained adequate reasons and highlighted discrepancies in the petitioner’s submissions regarding property transactions and gifts received. However, the court found these arguments insufficient to justify the flawed procedural approach taken by the tax authorities.
The core question before the court was whether the circumstances warranted judicial intervention. The High Court court scrutinised the show cause notice and the petitioner’s response, observing that the petitioner’s explanations were not adequately considered in the impugned order. Notably, issues raised in the order were not addressed in the original notice, undermining the fairness of the proceedings.
Considering the submissions of both sides, the Madars High Court ruled in favour of the petitioner. It quashed the impugned order. It directed the first respondent to issue a fresh order under Section 148A(b) of the Income Tax Act, providing the petitioner with a reasonable opportunity to respond within a maximum period of three months from the date of receipt of the court’s order. Additionally, the petitioner was instructed to extend full cooperation to ensure the timely completion of the aforementioned exercise.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
