Income Tax Notices Must Include Reasons, Even if Not Mandatory by Law: Patna HC Quashes Preliminary Orders [Read Order]

In a recent ruling, the Patna High Court quashed preliminary orders and held that notices issued under Section 148 of the Income Tax Act, even under the unamended provisions, must be supported by proper reasoning, regardless of whether the law mandates it.

Kishore Kumar Singh, a resident of Patna, had filed a writ petition challenging a notice dated 31.03.2021 issued by the Assistant Commissioner of Income Tax for the assessment year 2016–17. The petitioner argued that the notice, along with other subsequent orders, was issued arbitrarily and lacked any reasoning or factual basis which deprived him of an opportunity to respond meaningfully.

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The petitioner’s counsel argued that the reassessment was initiated merely on a change of opinion and that the Income Tax Department, while exercising quasi-judicial functions, was obligated to provide reasons to enable the assessee to file an effective response. They claimed the lack of such reasoning rendered the proceedings illegal.

The department’s counsel relied on decisions from the Supreme Court, including GKN Driveshafts (India) Ltd. v. ITO, and claimed that the law did not require reasons to accompany the notice under Section 148. They argued that the unamended provision applied to this case and so did not mandate the furnishing of reasons with the notice.

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The bench comprising Justice P. B. Bajanthri and Justice S. B. Pd. Singh disagreed, observing that even if the statute does not explicitly require it, principles of natural justice and constitutional fairness (under Article 14) necessitate that reasons be provided. The court held that the issuance of a vague, unsupported notice prevented the assessee from submitting a proper explanation or reply which was undermining the fairness of the proceedings.

The court also examined related writ petitions filed by other individuals and entities who faced similarly vague reassessment proceedings. Citing multiple Supreme Court decisions, including Oryx Fisheries Pvt. Ltd. v. Union of India and Managing Director, ECIL v. B. Karunakar, the court held that quasi-judicial authorities must provide clear and cogent reasons when exercising powers that have civil consequences.

The court granted liberty to the Income Tax Department to issue fresh notices within eight weeks, provided they are supported by detailed reasoning. The writ petitions were accordingly allowed.

To Read the full text of the Order CLICK HERE

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