Section 148A proceedings require disclosure of relied-upon material and a meaningful opportunity to respond.

The petitioner challenged proceedings concerning assessment year 2022–23, including an order under Section 148A(3), the prior approval under Sections 148A(3) and 151, and a notice under Section 148.

The proceedings began with a notice dated 27 March 2026, issued four days before the limitation period under Section 149(1)(b) expired. It alleged that business turnover of ₹14,66,08,364 had not been disclosed in the petitioner’s return.

The petitioner responded that the amount arose from a difference between bank credits and reported turnover, and that not all bank credits constituted turnover; he also offered to provide further information if required.

The respondent granted approval on 11 June 2026 and passed the impugned order on 16 June 2026. The Court noted that, although the order recorded the approval date as 11 June, the approval document itself referred to 27 March—before the petitioner’s response.

The Court applied Sections 148A(1) and 148A(3) of the Income Tax Act, 1961, governing the show-cause and decision-making stages before reassessment, together with Section 151, which requires prior approval, and Section 149(1)(b), which prescribes the relevant limitation period.

The Court’s reasoning reflects the principle that a taxpayer must receive notice of the material propositions relied on and a meaningful opportunity to respond before an order under Section 148A(3) is made; where the alleged income is based on a computation, the basis and supporting information must be disclosed sufficiently to permit a response.

No judicial precedents were cited.

Although the original notice identified alleged undisclosed turnover and the petitioner replied that bank credits could not automatically be treated as turnover, the respondents did not provide the requested computation or seek further particulars before proceeding.

The Section 148A(3) order also introduced matters not raised in the show-cause notice, including allegations concerning the petitioner’s firms, parking and rotation of funds, expenses, and unsecured loans.

In the Court’s view, deciding the matter on undisclosed propositions and without the computation risked turning reassessment into a roving enquiry rather than an enquiry into defined issues.

Because the proceedings had commenced within time, the Court accepted that the appropriate course was to restore them for proper consideration rather than terminate them altogether.

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

Upon service of the order, the second respondent was directed to furnish the computation of ₹14,66,08,364 and the information supporting it, and to give the petitioner a reasonable opportunity to respond in light of that material and the observations in the impugned order.

The Court further observed that the first respondent must examine all materials before granting prior approval, and left all contentions open.