The Telangana High Court, in Nitin Enterprises v. Income-tax Officer, Ward – 5(1), Hyderabad & Ors., has held that a show cause notice under Section 148A(1), an order under Section 148A(3), and the consequential notice under Section 148 of the Income-tax Act, being preliminary steps forming part of an ongoing reassessment proceeding, cannot ordinarily be challenged at the threshold under Article 226 of the Constitution.
The petitioner, a partnership firm engaged in trading in electrical fittings and retail, had filed its return of income for Assessment Year 2024-25 declaring total income of Rs. 21,01,230, which was processed under Section 143(1). Subsequently, reassessment proceedings were initiated following information stated to have emanated from a search and seizure action conducted under Section 132 in the case of M/s Polycab India Limited and its group concerns.
The show cause notice dated 26 March 2026 issued under Section 148A(1) alleged that the petitioner had undertaken unexplained and unaccounted transactions aggregating to Rs. 3,46,11,545 during the relevant assessment year. The petitioner denied having any transaction with Polycab India Limited and challenged the jurisdiction to reopen the assessment.
A principal contention raised by the petitioner was that since the information underlying the reassessment emanated from a search conducted on 22 December 2023, the proceedings were required to satisfy the requirements of Section 152(3) of the Income-tax Act. The petitioner also questioned the validity of the sanction accorded under Section 151.
The petitioner further argued that the material supplied with the original notice did not disclose any specific seized document, statement, invoice, ledger or other incriminating material directly establishing that income chargeable to tax had escaped assessment. It was also contended that the order under Section 148A(3) relied upon additional material relating to the Sunrise Group, a parallel set of accounts described as “Ka”, and statements of third parties, although such material was not specifically disclosed in the original notice.
The High Court, however, framed the central question as whether a show cause notice under Section 148A(1), the consequential order under Section 148A(3), and the notice under Section 148 could be challenged under Article 226 at the very threshold without first permitting the statutory reassessment procedure to run its course.
High Court’s Findings
The Court observed that the jurisdiction of a High Court under Article 226 is wide but is not intended to be exercised as a matter of course at every stage of a statutory proceeding. Where the statutory framework provides an effective mechanism for raising objections before the competent authority and subsequently before appellate forums, the assessee should ordinarily pursue those remedies.
According to the Court, proceedings under Sections 148A(1) and 148A(3) are essentially preliminary and investigative in character. They neither finally determine tax liability nor prevent the assessee from placing its complete factual and legal case before the Assessing Officer during the reassessment proceedings.
The Court acknowledged that the petitioner had raised substantial jurisdictional objections regarding the applicability of Section 152(3) and the validity of sanction under Section 151. However, it held that these objections should, in the first instance, be examined during reassessment. In the event of an adverse assessment order, the petitioner would have access to the appellate remedies provided under the Income-tax Act, including proceedings before the Commissioner of Income Tax (Appeals) and thereafter the Income Tax Appellate Tribunal.
Significantly, the Court also noticed that the Assessing Officer, while passing the order dated 24 June 2026 under Section 148A(3), had not specifically dealt with the petitioner’s objections concerning Section 152(3) and the sanction under Section 151. Nevertheless, the Court held that this omission did not convert the preliminary reassessment proceedings into a final and concluded order warranting interference under Article 226 at that stage.
Exception for Complete Lack of Jurisdiction
The High Court clarified that writ jurisdiction may still be exercised at the threshold in an appropriate case involving a total absence of jurisdiction or a patent breach of a mandatory statutory pre-condition going to the root of the power to reassess.
On the facts before it, however, the Court was not persuaded that such an exceptional situation existed. Determination of the petitioner’s objections required examination of material obtained through the Insight Portal, material relating to the Sunrise Group and statements recorded during the search. The Court held that such an exercise ought not to be undertaken in writ jurisdiction before the reassessment proceedings had culminated in a final order.
Decision
The Telangana High Court held that Article 226 cannot be converted into a forum of first resort for examining the sufficiency of every show cause notice or the correctness of every preliminary order passed during reassessment proceedings.
Accordingly, the Court held that the show cause notice dated 26 March 2026 under Section 148A(1), the order dated 24 June 2026 under Section 148A(3), and the consequential notice dated 24 June 2026 under Section 148 could not be challenged at the present stage in writ jurisdiction.
The question framed by the Court was answered against the petitioner and Writ Petition No. 24088 of 2026 was dismissed, with no order as to costs.
Key Takeaway
The judgment emphasises that challenges to reassessment proceedings under Sections 148A and 148 should ordinarily be raised within the statutory reassessment and appellate framework. A High Court may intervene at the notice stage where there is a clear absence of jurisdiction or patent breach of a mandatory statutory condition, but factual or mixed questions concerning the material relied upon are generally expected to be examined first by the Income-tax authorities.