An order passed under Section 148A(d) of the Income Tax Act, 1961, must not travel beyond the scope of the show-cause notice issued under Section 148A(b); any introduction of new grounds without providing the assessee an opportunity to respond violates the principles of natural justice.

JUDGMENT

VIBHU BAKHRU, J.

1. The petitioner [the Assessee] has filed the present petition under Article 226 of the Constitution of India, inter alia, impugning (i) notices dated 01.02.2024 and 14.02.2024 issued under Section 148A(b) of the Income Tax Act, 1961 [the Act]; (ii) an order dated 19.03.2024 passed under Section 148A(d) of the Act [impugned order]; (iii) a notice dated 19.03.2024 issued under Section 148 of the Act [impugned notice]; and (iv) the impugned approval purportedly granted by respondent no.2 [CCIT] under Section 151 of the Act. The above-mentioned notices and order were issued in respect of the assessment year [AY] 2017-18.

2. The Assessee is essentially aggrieved by the reopening of its assessment in respect of AY 2017-18 pursuant to the impugned notice issued under Section 148 of the Act. Although the Assessee has raised several grounds for assailing the impugned notice, Mr Ved Jain, learned counsel appearing for the Assessee, confined the challenge in the present petition to the ground that the order passed under Section 148A(d) of the Act is beyond the scope of the notice issued under Section 148A(b) of the Act. However, he also reserved the Assessee’s right to urge other grounds in appropriate proceedings. Thus, the principal question to be addressed is whether the impugned notice is liable to be set aside, as it is premised on an order dated 19.03.2024 passed under Section 148A(d) of the Act, which is beyond the scope of the notice under Section 148A(b) of the Act.

FACTUAL CONTEXT

3. The Assessee is a partnership firm engaged in the business of operating a chain of departmental stores. The Assessee asserts that during the relevant assessment year (AY 2017-18), it was running seven departmental stores in Delhi and held the necessary licenses for the sale of wine and beer. Being involved in retail trade, more than 90% of its sales were made in cash, which the Assessee regularly deposited into its bank accounts.

4. The Assessee filed its return of income on 30.10.2017 for AY 2017- 18 declaring a total income of ₹26,30,730/-. In its return, the Assessee disclosed that an amount of ₹6,23,39,100/- was deposited in the bank during the period from 09.11.2016 to 30.12.2016 [the demonetization period].

5. The Assessee’s return for AY 2017-18 was selected for scrutiny and the Assessing Officer [AO] issued a notice dated 24.09.2018 under Section 143(2) of the Act. One of the reasons for selecting the case for scrutiny was to examine the cash deposits made by the Assessee during the demonetization period.

6. During the assessment proceedings, the AO examined various issues, including the source of the cash deposits made by the Assessee during the demonetization period. To examine the genuineness and source of the cash deposited, the AO issued notices under Section 142(1) of the Act, seeking details from time to time.

7. In response to the aforesaid notices, the Assessee submitted replies and provided details of monthly cash deposits, cash sales for the period 2016, and other relevant information. The Assessee explained that it is engaged in retail trade and operates seven departmental stores in Delhi, where more than 90% of the sales are made in cash. The Assessee clarified that the source of the cash deposits was the receipts from sales made in the normal course of business. The Assessee explained that cash sales are a routine feature of retail business. In this regard, the Assessee also