Reassessment cannot proceed on grounds or material undisclosed in the Section 148A show-cause notice.

The petitioner challenged an order under Section 148A(3) of the Income Tax Act, 1961, the associated prior-approval order, and a notice under Section 148.

The proceedings concerned alleged undisclosed business turnover of ₹3,34,51,846.

The notice under Section 148A(1), issued on 30 March 2026, stated that the amount was not disclosed in the return; the petitioner replied that it reflected a difference between bank credits and turnover and that not all bank credits constituted turnover.

He also offered to provide further details if required.

The respondents subsequently passed the impugned order and issued the notice, relying on additional propositions concerning the petitioner’s firms, alleged fund rotation, expenses, and unsecured loans that had not been put to him in the show-cause notice.

1. Whether the order under Section 148A(3) could stand when it relied on adverse propositions that were not disclosed to the petitioner in the show-cause notice

2. Whether the reassessment proceedings could proceed without disclosing the computation and underlying information supporting the alleged undisclosed turnover of ₹3,34,51,846, and without giving the petitioner a meaningful opportunity to respond

3. Whether the prior approval under Section 151 was properly granted on consideration of the relevant materials

Sections 148A and 147 of the Income Tax Act govern the pre-reassessment inquiry and subsequent reassessment process; the affected taxpayer must have a fair opportunity to address the material and propositions forming the basis for the Section 148A decision.

The Court also considered Section 149(1)(b), noting that the proceedings had commenced before the relevant limitation expired.

Section 151 requires prior approval for the relevant action, and the approving authority must examine the materials before granting approval.

Although the initial notice identified alleged undisclosed turnover, it did not explain how the figure of ₹3,34,51,846 had been computed or provide the information on which the computation rested.

The petitioner’s reply expressly disputed treating all bank credits as turnover and offered to provide further details, but the respondents did not supply the requested basis or seek further information.

The final order also relied on matters—including alleged fund parking and rotation through firms, substantial expenses, and unsecured loans—that were outside the show-cause notice.

The Court held that these matters required disclosure and an opportunity to respond; otherwise, the reassessment inquiry risked becoming a roving enquiry rather than one directed to defined issues.

While noting an “amiss” in the prior-approval process, the Court chose to restore the proceedings for proper consideration rather than terminate them outright.

The Court quashed the Section 148A(3) order, the prior-approval order, and the Section 148 notice, restoring the proceedings to the second respondent for reconsideration.

Once served with the order, the second respondent was directed to furnish the computation of ₹3,34,51,846 and its underlying information, and to give the petitioner a reasonable opportunity to respond.

The Court also directed that the approving authority, when considering a report for approval under Section 151, examine all relevant materials before granting approval.

All contentions were left open.