income tax
If you have received a reassessment notice from the Income Tax Department, the first thought is that the tax demand is wrong and it will have to be proved. But sometimes the matter is not just about tax, but it is also important whether the department has properly followed the procedure laid down in the law while issuing the notice or not.
Recently, the Income Tax Appellate Tribunal (ITAT), Pune Bench has given an important decision, which can provide great relief to such taxpayers who have received re-assessment notices. The tribunal said that if the Income Tax Department has not followed the prescribed procedure, then the entire re-assessment can be cancelled.
What was the matter?
This case is of Sanjyot Jai Sheth vs Income Tax Officer (ITO). In this decision dated July 2, 2026, ITAT found that the department made several serious procedural mistakes while initiating re-assessment under sections 148A and 148 of the Income Tax Act.
The tax department alleged in the first notice that the taxpayers have hidden income by selling a property. But in the final order issued later, the allegation completely changed. Now the department said that due to purchasing property at low price, income of about Rs 3.45 crore has been hidden.
Why did ITAT cancel the notice?
The tribunal said that the allegations made in the notice and the final order were completely different from each other. The final action was taken on a basis different from the one to which the taxpayers were given an opportunity to respond to the allegations. This is against the law.
ITAT clearly said that if the Assessing Officer wants to take action on any new or different issue, he will have to first issue a fresh notice under section 148A(b) and give full opportunity to the taxpayers to respond.
Even the deadline was not followed
The tribunal also found that the department issued the notice after the limitation period. According to the earlier decision of the Supreme Court, the department had to take further action within the stipulated time, but the notice was issued late. Therefore this too was not considered valid as per the law.
What are the rights of taxpayers?
According to Chartered Accountant Dr. Suresh Surana, before starting re-assessment, the department should have concrete information to prove that any income has not been assessed correctly.
After this the department:
- Under section 148A(b), notice will have to be sent giving reasons.
- Taxpayers will have to be given full opportunity to respond.
- Only after considering the reply, order under section 148A(d) will have to be issued.
- The final order should be on the same basis as was mentioned in the earlier notice.
- If the department adds a new allegation later, it will be necessary to issue a fresh notice.
When will new notice have to be given?
If the investigating officer makes a major change in the property, transaction, amount, source of income or the basis for adding tax, he will have to issue a new 148A(b) notice. A new notice is not necessary merely for minor technical errors or clarifications.
What to do after receiving the notice?
If you receive a re-assessment notice, do not ignore it at all. If wrong information, wrong property, wrong amount or transaction with any other person has been shown in the notice, then reply in detail within the stipulated time.
Also submit sale deed, bank statement, property documents, ITR and other important records along with your answer. Also ask the department for a copy of the information on the basis of which the notice has been issued.
What is the lesson for common taxpayers?
This decision states that the Income Tax Department cannot send a notice on the basis of one allegation and later re-assess on some other basis. If the department has not followed the legal process or violated the deadline, then taxpayers have the right to legally challenge that notice. Therefore, when receiving any tax notice, it is very important to respond in time and seek advice from a tax expert if necessary.
