Query on validity of notice u/s 148, Income Tax

[sudeep srivastava]

A notice u/s 148 was issued to assessee for AY 2021-22 u/s 148 on 31st March 2025 on the basis of search conducted u/s 132 or requsition u/s 132A on 23/10/2024 in case of another person after obtaining prior approval u/s 151 but without issuing notice 148A. The notice states that the conditions of Explanation 2(iv) of Section 148 read with proviso to Section 148A are complied with.

In my opinion Explanation 2(iv) of Section 148 was ommited w.e.f. 1/09/2024 vide Finance Act Section 44 of the Finance (No. 2) Act, 2024 and amended Section 148 is applcaible from 1/4/2025. Also defination of information for the purpose of Section 148 & 148A was amended by amending sub section 3 of Section 148 and case of search and seazure u/s 132 & 132A were removed therefrom.

Thus in the absence of notice u/s 148A whether notice u/s 148 is valid on not. Member are request to give their opinion.

Posts / Replies

[YAGAY andSUN]

Based on the facts presented, the validity of the notice issued under section 148 of the Income-tax Act, 1961 ("the Act") dated 31st March 2025, without issuance of notice under section 148A, in a case where the basis of reopening is a search under section 132 or requisition under section 132A conducted on 23rd October 2024 in the case of another person, requires a detailed legal examination in light of the amendments brought in by the Finance (No. 2) Act, 2024.

Legal Analysis:

1. Applicability of Pre-Amended or Post-Amended Law:

• It is pertinent to note that section 44 of the Finance (No. 2) Act, 2024 has omitted Explanation 2(iv) to section 148 with effect from 1st September 2024.
• Further, Explanation 1 to section 148 and sub-section (3) of section 148, which earlier included “information” arising from a search under section 132 or requisition under section 132A in the case of another person, has also been amended to omit such search-related information from the definition of “information” for the purpose of sections 148 and 148A.
• The said amendment is effective from 1st April 2025, being the assessment year 2025-26 onwards, as per the language of the Finance (No. 2) Act, 2024.

2. Issuance of Notice Under Section 148 Without Section 148A in Search Cases:

• As per the proviso to section 148A, the procedure laid down under section 148A (i.e., opportunity of being heard before issuance of notice u/s 148) is not applicable where a search is initiated under section 132 or books of account or other documents or any assets are requisitioned under section 132A, in the case of the assessee.
• However, in the case of ‘another person’, where the AO intends to reopen the assessment of the assessee based on material found during the search on such another person, section 148A is mandatory, in the absence of specific exclusion.

3. Relevance of Explanation 2(iv) to Section 148 (now omitted):

• The department appears to have relied on Explanation 2(iv) to section 148, which earlier provided that search cases, including those involving “another person,” would be deemed to be information for the purpose of section 148.
• However, since Explanation 2(iv) has been omitted with effect from 1st September 2024, and the notice under section 148 has been issued on 31st March 2025, the omission is operative on the date of issuance of the notice.

4. Impact of the Amendments on Present Case:

• The notice u/s 148 has been issued on 31st March 2025, and hence the law as on the date of issue of the notice shall apply.
• As on that date:
  • Explanation 2(iv) stood omitted.
  • The definition of "information" under section 148(3) no longer included search cases.
  • Therefore, the basis for invoking jurisdiction under section 148 without following the procedure of section 148A no longer survives in law.

Conclusion:

In light of the foregoing:

• The omission of Explanation 2(iv) to section 148 with effect from 1st September 2024 nullifies the deeming fiction treating search-related information in the case of another person as “information” for reopening under section 148.
• Since the assessee is not the searched person, and the search was conducted in the case of another person, the AO was mandatorily required to follow the procedure laid down in section 148A.
• Non-issuance of notice under section 148A, therefore, renders the notice under section 148 issued on 31st March 2025 invalid and without jurisdiction.
• The reliance by the AO on the omitted provision (Explanation 2(iv)) is misconceived in law, as the same was not in force at the time of issuance of notice.

Professional Opinion:

Accordingly, it is respectfully submitted that the notice issued u/s 148 dated 31.03.2025 in the absence of compliance with section 148A is invalid in law and liable to be quashed, being contrary to the provisions of the Act as amended by the Finance (No. 2) Act, 2024.