Saurabh Agrawal Vs Union of India and Others (Madhya Pradesh High Court)
Summary: The Madhya Pradesh High Court, in Saurabh Agrawal Vs Union of India and Others, dismissed a writ petition challenging an order dated 12 June 2026 under Section 148A(3) of the Income Tax Act, 1961, and the consequential reassessment notice under Section 148 for Assessment Year 2023-24. The Division Bench comprising Justice Vivek Rusia, Acting Chief Justice, and Justice Pradeep Mittal held that interference under Article 226 was not warranted at the pending reassessment stage, particularly when the assessee could participate before the Assessing Officer and raise his objections during reassessment proceedings. The Court further observed that examination of the relevant information would be more exhaustive during reassessment, and the assessee would have access to statutory remedies thereafter.
The petitioner had filed his return of income on 30 October 2023 for Assessment Year 2023-24, declaring income of ₹26,00,690. His audited financial statements disclosed unsecured loans aggregating to ₹3,13,84,101. Subsequently, a survey under Section 133A was conducted on 10 March 2025, during which the Department impounded loose papers, notebooks and registers, including register BI-01, and examined CCTV footage. On 29 March 2026, the Assessing Officer issued a notice under Section 148A(1), enclosing a 32-page compilation of material relied upon. The petitioner submitted his objections on 3 April 2026, contending that the underlying entries related to Financial Years 2023-24 and 2024-25, corresponding to Assessment Years 2024-25 and 2025-26, rather than Financial Year 2022-23 relevant to Assessment Year 2023-24.
The petitioner argued that the Department had failed to establish a live and proximate nexus between the survey material and the assessment year sought to be reopened. He relied upon the principle that every assessment year is a separate unit of assessment and that material relating to subsequent years cannot automatically justify reassessment for an earlier year. The petitioner also contended that the proceedings were based on an advisory issued by the Investigation Wing rather than the Assessing Officer’s independent satisfaction. He pointed out that the impugned order itself stated that the exact year of taxability and the connection of the transactions with the relevant previous year required further examination during reassessment. According to him, such uncertainty demonstrated that the jurisdictional preconditions for issuing a notice under Section 148 had not been fulfilled.
Additional objections concerned the evidentiary value of the impounded documents and the validity of the statutory approval. The petitioner submitted that a statement recorded during the survey had been retracted by affidavit dated 12 April 2026 because it had allegedly been obtained under stress and without access to the relevant books. He further alleged that the loose papers and register entries were unverified and uncorroborated “dumb documents” whose authorship and authenticity had not been established. It was also argued that substantial portions of the disclosed unsecured loans represented opening balances from earlier years and that the approval obtained under Section 151 was mechanical. The petitioner relied upon several judicial authorities, including ITO Vs Lakhmani Mewal Das, Radhasoami Satsang Vs CIT, Red Chilli International Sales Vs ITO and CIT Vs S. Goyanka Lime & Chemical Ltd., to support his jurisdictional challenge.
The Revenue opposed the writ petition, submitting that the petitioner had an alternative remedy and that no interference was justified at the present stage. After considering the rival submissions, the High Court observed that the assessment proceedings for Financial Years 2023-24 and 2024-25 were still ongoing. It held that the petitioner would suffer no prejudice by participating before the Assessing Officer and that all grounds challenging the reassessment proceedings could be raised at the appropriate statutory stage. The Court described the limited scope of writ review at this stage as concerning the existence of information suggesting escapement of income, while recognising that detailed examination of the material would occur during reassessment proceedings.
Accordingly, the High Court dismissed the writ petition without quashing the order or reassessment notice. It clarified that observations made by the assessing authority concerning the merits of the alleged escaped income would remain subject to the final reassessment order and would not prejudice the assessee’s rights and contentions or the remedies available under the statute. The decision does not determine that the unsecured loans are unexplained, that income has actually escaped assessment, or that the Department’s allegations have been established. Its operative conclusion is confined to declining writ interference at the intermediate stage and leaving the substantive issues open for adjudication in the reassessment process.
Cases Discussed
1. Radhasoami Satsang, Saomi Bagh, Agra Vs Commissioner of Income Tax (Supreme Court); (1992) 193 ITR 321; AIR 1992 SC 377 — Cited by the petitioner concerning the separate identity of assessment years and the relationship between consistency and the annual nature of income-tax assessments.
2. Bharat Sanchar Nigam Ltd. and Another Vs Union of India and Others (Supreme Court); AIR 2006 SC 1383 — Cited by the petitioner in support of the legal submissions concerning assessment periods and the requirement for an appropriate nexus with the relevant year.
3. Income Tax Officer, I Ward, District VI, Calcutta and Others Vs Lakhmani Mewal Das (Supreme Court); (1976) 103 ITR 437; AIR 1976 SC 1753 — Cited by the petitioner for the requirement of a direct nexus or live link between information and the basis for reopening an assessment.
4. M/s Etiam Emedia Ltd. Vs Income Tax Officer 2(2) and Another (Madhya Pradesh High Court); Writ Petition No. 28177/2018; 19/12/2018; AIR OnLine 2018 MP 1347 — Cited by the petitioner in support of his challenge to reassessment proceedings allegedly lacking material relevant to the assessment year.
5. Red Chilli International Sales Vs Income Tax Officer (Supreme Court); SLP (C) No. 86/2023; 03/01/2023; (2023) 146 taxmann.com 224 — Cited by the petitioner regarding judicial examination of jurisdictional preconditions for issuance of a reassessment notice notwithstanding the existence of statutory remedies.
6. Commissioner of Income Tax, C-I Vs Vatika Landbase (P) Ltd. (Delhi High Court); ITA No. 670/2014 — Cited by the petitioner for the argument that unverified loose papers and uncorroborated entries cannot independently establish taxable transactions.
7. Commissioner of Income Tax Vs S. Goyanka Lime & Chemical Ltd. (Supreme Court); 2015 SCC OnLine SC 1940 — Cited by the petitioner for the proposition that mechanical approval without independent application of mind cannot satisfy the statutory sanction requirement. The linked TaxGuru PDF contains the underlying Madhya Pradesh High Court judgment.
FULL TEXT OF THE ORDER OF MADHYA PRADESH HIGH COURT
The petitioner has filed this petition under Article 226 of the Constitution of India, challenging the impugned order dated 12.06.2026 (Annexure P/2) passed by the respondent No.2 under Section 148A(3) of the Income Tax Act, 1961, and the consequential notice of even date (Annexure P-1) issued under Section 148 of the Act for Assessment Year 2023-24, whereby reassessment proceedings have been initiated against the petitioner. The principal grievance of the petitioner is that the material relied upon by the respondents pertains to subsequent assessment years does not have any live or proximate nexus with the Assessment Year 2023-24.
Facts of the case in short are as under:
2. The petitioner had filed his return of income on 30.10.2023 (Annexure P-4) for AY 2023-24 declaring a total income of Rs.26,00,690/-. The audited financial statements (Annexure P-5) accompanying the return disclosed unsecured loans aggregating to Rs.3,13,84,101/-. Thereafter, a survey under Section 133A of the Act was conducted on 10.03.2025, during which certain loose papers, notebooks and registers, including register BI-01, were impounded and CCTV footage was examined.
3. Subsequently, respondent No.2 issued notice dated 29.03.2026 (Annexure P-6) under Section 148A(1) of the Act along with a 32-page document containing the material relied upon by the Department. According to the petitioner, the material principally comprised entries from register BI-01, CCTV footage and other survey material. It is alleged that the entries relied upon relate to Financial Years 2023-24 and 2024-25, corresponding to AYs 2024-25 and 2025-26, and not to FY 2022-23 corresponding to the assessment year in question, i.e. AY 2023-24.
4. The petitioner submitted his reply dated 03.04.2026 (Annexure P-7), contending that the material relied upon by the Department did not identify any transaction or entry pertaining to FY 2022-23. It was further contended that the proceedings were based upon an advisory of the Investigation Wing to examine the genuineness of the loans and that there was no independent or tangible material before the Assessing Officer suggesting escapement of income for AY 2023-24.
5. The petitioner also relied upon the statement recorded during the survey proceedings and contended that the same had subsequently been retracted by affidavit dated 12.04.2026 (Annexure P-8). According to the petitioner, the statement was recorded under stress and without access to the relevant books and supporting records and, despite the retraction, no independent corroborative material was brought on record by the respondents.
6. Despite the objections raised by the petitioner, respondent No.2 passed the impugned order under Section 148A(3) of the Act and issued the consequential notice under Section 148. The petitioner particularly relies upon the observation contained in paragraph 6(i)(d) of the impugned order that the exact year of taxability and linkage of the transactions with the relevant previous year required detailed examination during reassessment proceedings. According to the petitioner, the said observation itself demonstrates that no nexus between the alleged information and AY 2023-24 had been established when jurisdiction was assumed.
7. The petitioner has accordingly approached this Court contending that the jurisdictional requirement under the first proviso to Section 148 of the Act was not satisfied and that the impugned order and notice are liable to be quashed.
Submissions on behalf of the petitioner:
8. Learned senior counsel for the petitioner submits that the impugned proceedings are without jurisdiction as the mandatory condition prescribed under the first proviso to Section 148 of the Act has not been fulfilled. It is contended that before issuance of notice under Section 148, there must be information with the Assessing Officer suggesting that income chargeable to tax has escaped assessment for the relevant assessment year. In the present case, the material relied upon by the Department admittedly relates to FYs 2023-24 and 2024-25, corresponding to AYs 2024-25 and 2025-26, whereas the reopening has been initiated for AY 2023-24.
9. It is further submitted that every assessment year constitutes a separate and independent unit of assessment and material about one assessment year cannot be mechanically transposed to another assessment year in the absence of a direct, live and proximate nexus. Reliance has been placed upon (i) Radhasoami Satsang, Saomi Bagh, Agra Vs Commissioner of Income-tax, reported in AIR 1992 SC 377 ; (ii) Bharat Sanchar Nigam Ltd. and Another Vs Union of India and Others , reported in AIR 2006 SC 1383 ; (iii) The Income Tax Officer, I Ward, District VI, Caclutta and others vs. Lakhmani Mewal Das, reported in AIR 1976 SC 1753 ; and (iv) M/s Etiam Emedia Ltd. vs. Income Tax Officer 2(2) & Another, reported in AIR OnLine 2018 MP 1347 . According to learned senior counsel, the material relied upon by the respondents does not satisfy the requirement of a live link or rational nexus with AY 2023-24.
10. Learned senior counsel further submits that respondent No.2 himself recorded in the impugned order that the exact year of taxability and linkage of the transactions with the relevant previous year required detailed examination during reassessment proceedings. It is argued that jurisdiction cannot be assumed merely for the purpose of conducting an enquiry or discovering whether income has escaped assessment. The existence of jurisdictional facts must precede the exercise of jurisdiction.
11. It is also submitted that the proceedings are founded upon borrowed satisfaction, as the Investigation Wing had merely advised initiation of proceedings for examining the genuineness of the loans. The petitioner submits that such an advisory could not substitute the independent satisfaction required of the Assessing Officer.
12. Learned senior counsel for the petitioner also submits that there is no efficacious alternative remedy available against the impugned order and consequential notice at this stage. It is further submitted that, in any event, the availability of an alternative remedy is not an absolute bar to the exercise of writ jurisdiction under Article 226, particularly where the very assumption of jurisdiction is under challenge. Hence, the petition cannot be dismissed merely on the ground of availability of an alternative remedy. Reliance is also placed on matter of Red Chilli International Sales vs. Income Tax Officer, reported in [2023] 146 taxmann.com 224 (SC) in which it has been held that writ petition is liable to be entertained to examined whether the jurisdiction pre-conditions for issue of notice under Section 148 of the Income Tax Act, 1961 is satisfied.
13. Learned senior counsel further contends that the loose papers and entries in register BI-01 are unverified and uncorroborated and constitute mere “dumb documents”. It is submitted that their authorship, ownership and authenticity have not been established. Reliance has been placed upon Commissioner of Income Tax, C-I vs. Vatika Landbase (P) Ltd., passed in ITA 670/2014 (Delhi High Court) in support of the said contention.
14. Learned senior counsel also submits that the unsecured loans aggregating to Rs.3,13,84,101/- were already disclosed in the audited balance sheet accompanying the return for AY 2023-24. A substantial portion thereof represented opening balances brought forward from earlier years and, therefore, the disclosed transactions could not by themselves constitute fresh information suggesting escapement of income for the relevant assessment year.
15. Lastly, learned senior counsel challenges the approval granted under Section 151 of the Act as mechanical and without independent application of mind. Reliance is placed upon the decision in Commissioner of Income-tax v. S. Goyanka Lime & Chemical Ltd. , reported in 2015 SCC OnLine SC 1940, wherein, according to the petitioner, mechanical sanction without objective consideration of the material was held unsustainable. It is therefore submitted that the impugned order dated 12.06.2026 under Section 148A(3), the consequential notice under Section 148 and all consequential proceedings deserve to be quashed.
Submissions on behalf of the respondents:
16. Per contra, learned counsel appearing for the respondents submits that the alternative remedy is available against the impugned order and consequential notice at this stage. The respondents accordingly submits that no interference is warranted with the order passed under Section 148A(3) and the consequential notice issued under Section 148 of the Act.
17. We have heard learned counsel for the parties and perused the record.
Appreciations and conclusions:
18. The main and foremost reason for invoking the jurisdiction of this High Court is that the entries of the unsecured loans aggregating to Rs.3,13,84,101/- relied upon relate to Financial Years 2023-24 and 2024-25, corresponding to AYs 2024-25 and 2025-26, and not to FY 2022-23 corresponding to the assessment year in question, i.e. AY 2023-24. During the course of argument, the query regarding completion of assessment of Financial Years 2023-24 and 2024-25 was raised, and it was answered that it is still ongoing. In such a situation no prejudice is going to be caused to the petitioner, and the petitioner can participate before the Assessing Officer. We are of the considered opinion that at this stage no interference by the writ court is warranted in the order passed under section 148A(d) of the Act, as all the grounds of challenge to such order would be available to the petitioner while challenging the order passed in reassessment proceedings consequent to the notice issued under section 148 of the Act, 1961, if occasions so arises in future.
19. The limited scope available under Article 226 of the Constitution of India to adjudicate an order passed under section 148A(d) of the Act, 1961 would be confined to the existence of the information only, in view of the scheme of the Act of 1961. Examining the scope of proceedings under section 148A vis-a-vis reassessment proceedings under section 148 of the Act, it is observed that by the very nature of proceedings, the examination would remain more exhaustive at the stage of reassessment proceedings, with elaborate remedies available under the statute to the assessee.
20. The order passed by the Assessing Officer under Section 148A(d) of the Act regarding existence of information suggesting that income chargeable to tax has escaped assessment would otherwise remain subject to reassessment order passed under Section 148 of the Act. Thus, any observations of the assessing authority while passing order under Section 148A(d) about merits of assessment of income would remain subject to the order to be ultimately passed in reassessment proceedings under Section 148 and would not be to the prejudice of rights and contentions of the assessee under Section 148 as well as departmental remedies in respect thereof.
21. In view of the above discussion, the writ petition is dismissed.
