Notice issued without sufficient reasons to initiate reassessment is not sustainable

Last updated: 24 February 2023

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The Bombay High Court has ruled that a notice to reopen income tax assessments is invalid if issued without sufficient reasons. The court quashed a notice issued under Section 148 of the Income Tax Act, finding that the Revenue Department had not independently applied its mind or conducted its own inquiry. The judgement stressed that reassessment proceedings must be based on recorded reasons and cannot be substituted by affidavits or oral arguments, reinforcing the principle of 'reason to believe' rather than mere suspicion.

Court :
Bombay High Court

Brief :
The Hon'ble Bombay High Court in B.U. Bhandari Autolines Pvt. Ltd. v. The Assistant Commissioner of Income Tax, And Ors. [Writ Petition No. 5059 of 2022 dated February 10, 2023] has quashed the notice under Section 148 of the Income Tax Act, 1961 ('the IT Act') for escaping the income assessment, and set asidethe consequential order passed, on the ground that the notice was issued without sufficient reasons to initiate reassessment proceedings without satisfying the conditions precedent under Section 147 of the IT Act. Held that, the Revenue Department had not independently applied its mind to the information received or had conducted its own inquiry into the matter. Further held that, It is settled law, that the issue of reopening of assessment has to be tested on the basis of reasons recorded and cannot be substituted by an affidavit or oral submissions.

Citation :
Writ Petition No. 5059 of 2022 dated February 10, 2023

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