Supplementing incorrect notice u/s 148A(b) is not possible if the foundation of the alleged addition is missing in the original notice – High Court

Issue of the Case:

• The Assessee was issued a notice u/s 148A(b) providing an opportunity to show cause as to why income escaping assessment should not be taxed in the hands of the Assessee.
• The information provided by the Assessing Officer (AO) regarding the income escaping assessment was factually incorrect, yet the AO without admitting its mistake and providing the Assessee an opportunity of being heard regarding with the correct facts, passed an order u/s 148A(d) along with a notice u/s 148 of the Act stating that the case was fit for re-assessment. The facts mentioned in the order u/s 148A(d) were totally distinct from the facts mentioned in notice u/s 148A(b).
• The Assessee aggrieved from such impugned order u/s 148A(d) filed a writ petition before the Hon’ble High Court.

Decision of the Hon’ble High Court of Delhi:

• The Hon’ble High Court held that the main intention of Section 148A(b) is to provide an opportunity to the Assessee to rebut the allegations made by the AO regarding the income escaping assessment. The Assessee can only rebut those allegations which have been presented before him through the notice u/s 148A(b).
• The High Court further relied on its own judgement in case of Catchy Prop-Build Private Ltd. Vs. Assistant Commissioner of Income Tax & Anr., 2022 (10) TMI 771-Delhi High Court to hold that the notice issued must contain the foundational allegation, basis which the AO intends to make an addition. Such foundational allegation cannot be incorporated by way of a supplementary notice.
• Accordingly, the order passed by the AO u/s 148A(d) along with notice issued u/s 148 were set aside.

SW Point of View:

While issuing a notice u/s 148A(b), the AO must have complete and accurate facts regarding income escaping assessment. If order for initiating re-assessment is passed without providing the correct facts to the Assessee and an opportunity to rebut the same is not given, then such an order is BAD IN LAW and relief can be sought by way of Writ Petition.

Virendra Vikram, Tax Associate, SW India

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