The court upheld the validity of the notice under section 148A, emphasizing that the provisions are designed to protect the assessee's rights and provide an opportunity for explanation before reassessment.

JUDGMENT :

Petitioner challenges an order issued under section 148A(d) of the Income Tax Act, 1961 (for short 'the Act') for the assessment year 2017-18.

2. Petitioner is an assessee under the Act. On 20.02.2024, he was served with a notice under section 148A(b) of the Act pointing out that for the assessment year 2017-18, enquiry conducted has brought out information suggesting that income had escaped assessment within the meaning of section 147 of the Act and asked him to show cause why a notice under section 148 of the Act should not be issued. The annexure referred to cash deposits of Rs. 19,38,543/- and aggregate debit of Rs.1,35,37,590/- from the account of the petitioner. An opportunity of hearing was also granted to him.

3. In the reply, petitioner stated that he is an NRI having no taxable income in India except for some interest income. It was further stated that he has not been able to obtain details from the bank and pointed out that the details are not presently available to justify the cash deposit, except that it might have been his family members who would have deposited the amounts. As far as the debit was concerned, it was regrettably stated that he had no details but asserted that there was no income element in it. Petitioner also questioned the time limit for issuing the notice under section 148 of the Act.

4. Despite the above reply, Ext.P3 order was issued on 22.03.2024 under section 148A(d) of the Act after obtaining approval of the concerned authority determining it to be a fit case to issue a notice under section 148 of the Act observing that the deposits and withdrawal into and from the account of the petitioner remains unexplained. As the amount exceeded Rs.50,00,000/- the limitation was 10 years and hence it was observed that the time limit had not expired. A notice under section 148 of the Act was also issued, proposing to reassess the petitioner and directed him to file a return of income.

5. A statement has been filed by the respondents pointing out that the authorised representative of the petitioner was heard and the notice was issued after analysing the contentions. It was found that the withdrawal to the tune of Rs.1,35,37,590/- was not supported by deposits and the assessee has not explained the source of deposits, thereby leaving an unexplained income to that extent. It was also observed that the assessee had not filed the return of income despite engaging in financial transactions exceeding the threshold limit for filing a return. It was contended by the respondents that all procedures contemplated under section 148A of the Act were complied with and there was no reason to interfere under Article 226 of the Constitution of India.

6. It is also pleaded by the petitioner that the respondent has proceeded on a roving enquiry unsupported by any material to assume that withdrawal will constitute income. It is further stated that no proper enquiry as required under section 148A(a) of the Act for issuing the notice was carried out and therefore the proceedings are totally invalid.

7. Smt. Ammu Charles, the learned counsel for the petitioner vehemently contended that the show cause notice issued under section 148A(b) as well as the order passed under section 148A(d) ought to be interfered with, since the requirements under the statute have not been met. According to the learned counsel, the assessee was never asked to explain the source of funds and was instead issued with a show cause notice pointing out the withdrawal. After issuing the show cause notice under section 148A(b) of the Act referring to certain withdrawals from the bank account, the respondents erred in deciding to issue notice under section 148 of the Act alleging unexplained source of funds. According to the petitioner, the first respondent has erroneously added withdrawals amounting to Rs.1,35,37,590/- to the deposits for artificially inflating the alleged income escaped assessment, beyond the threshold limits to initiate proceedings. T