Reassessment Notice issued Without Prior Verification by AO was Invalid: Bombay HC

By CA Sandeep Kanoi Income Tax Judiciary February 4, 2025

TaxGuru Citation: 2025 taxguru.in 871
Case Name: Narendra Kumar Shah Vs ACIT (Bombay High Court)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2019-2020
Courts: All High Courts, Bombay High Court

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Narendra Kumar Shah Vs ACIT (Bombay High Court)

Bombay High Court quashed the reassessment proceedings initiated against Narendra Kumar Shah for the Assessment Year 2019-20, citing procedural lapses by the Income Tax Department. Shah had filed his return of income on November 29, 2019, which was duly processed under Section 143(1) of the Income Tax Act. However, on March 31, 2023, he received a notice under Section 148A(b), alleging that he had not filed his return despite having a salary income of ₹58,18,452 and securities purchases worth ₹5,22,000. Shah responded by submitting proof of his filed return, including tax payments totaling ₹18,36,575 and a claimed refund of ₹1,27,100. Despite this, the Assessing Officer (AO) proceeded to reject his objections, concluding that Shah failed to provide justification for the transactions.

The High Court ruled that the reassessment notice was unjustified as the AO did not conduct the necessary verification before issuing it. The court emphasized that tax authorities must verify available data, as mandated by CBDT guidelines, before initiating reassessment proceedings. Had the AO checked Shah’s tax records using his PAN, it would have been evident that he had already filed his return and paid taxes. The court criticized the mechanical issuance of notices without due diligence and set aside both the notice under Section 148A(b) and the order under Section 148A(d). The judgment reaffirmed that tax reassessment proceedings must be based on substantive verification rather than automated risk management triggers, ensuring fairness in tax administration.