New Section 148 SCN Needed for issues not previously raised: Madras HC

Annam Rajasekher Bindu Vs ITO (Madras High Court)

The petitioner, Annam Rajasekher Bindu, challenged an order dated March 28, 2023, issued under Section 148A(d) of the Income Tax Act, 1961, and the consequential notice under Section 148 issued on the same date. The petitioner initially received a notice on February 28, 2023, under Section 148A(b), requesting a show cause as to why a notice under Section 148 should not be issued concerning specified transactions. The petitioner responded to this notice on March 3, 2023. Despite the response, the impugned order concluded that it was a fit case for the issuance of a notice under Section 148, leading to the filing of this writ petition.

Petitioner’s Arguments

The petitioner’s counsel contested the impugned order on three primary grounds:

1. Basis of Information: The notice under Section 148A(d) was primarily based on information obtained from the Insight Portal as per the risk management strategy of the Income Tax Department. The petitioner’s counsel argued that relying solely on this information was insufficient, citing the Bombay High Court judgment in Anwar Mohammed Shaikh v. Assistant Commissioner of Income Tax.
2. Direct Link Requirement: The counsel argued that there was no direct or live link between the information from the Insight Portal and the alleged escaped income, a necessary prerequisite for issuing a notice under Section 148. This argument was supported by the Bombay High Court ruling in Digil Electronics Pvt. Ltd. v. Assistant Commissioner of Income Tax.
3. Unraised Issue in Show Cause Notice: The impugned order raised an issue that was not previously mentioned in the show cause notice. Specifically, it noted a discrepancy between the sale consideration of an immovable property and its guideline value, asserting that the difference was assessable under Section 56(2)(vii)(b) of the Income Tax Act. The petitioner’s counsel argued that this discrepancy was not mentioned in the show cause notice, thereby denying the petitioner an opportunity to respond.

Respondent’s Counterarguments