Reassessment Objections Must Be Raised Before Assessing Officer First: Telangana High Court

The Telangana High Court on 11 August declined to interfere with reassessment proceedings against Nitin Enterprises at the preliminary stage, holding that objections concerning the jurisdiction and validity of the reassessment must first be raised before the Assessing Officer and, if necessary, pursued through the statutory appellate remedies.

A Division Bench comprising Justices P. Sam Koshy and Narsing Rao Nandikonda held that proceedings initiated through a notice under Section 148A and the consequential notice under Section 148 of the Income Tax Act, 1961 are preliminary in nature and do not by themselves determine any tax liability. They observed:

"..We are conscious that respondent No.1 while passing the order dated 24.06.2026 under Section 148A(3) of the Act, has not, in terms dealt with the petitioner's specific objections regarding the applicability of Section 152(3) and the validity of the sanction under Section 151. This omission however does not in our considered view convert what is otherwise a preliminary step in a reassessment proceeding into a final and concluded order amenable to challenge under Article 226 at this stage..."

Nitin Enterprises, a partnership firm engaged in the trading of electrical fittings and retail business in Hyderabad, had challenged the reassessment proceedings initiated for the relevant assessment year. The proceedings were based on information allegedly received through the Insight Portal under the Central Board of Direct Taxes' Risk Management Strategy and material arising from a search conducted in the case of Polycab India Ltd. and its group concerns.

Nitin Enterprises denied having any transactions with Polycab India Ltd. and contended that the reassessment proceedings were without jurisdiction. It argued that since the information relied upon emanated from a search conducted during the specified period, the provisions governing search-related reassessment had to be considered. It further questioned the validity of the sanction granted for issuance of the reassessment notice.

The Court, however, held that these objections required examination of the material relied upon by the Department, including search material and statements of third parties, and could appropriately be considered by the Assessing Officer during the reassessment proceedings. It observed that the High Court's writ jurisdiction under Article 226 is not intended to become a forum of first resort for challenging every show cause notice or preliminary order issued in reassessment proceedings.

The Bench noted that Nitin Enterprises had an effective statutory mechanism to raise both factual and jurisdictional objections before the Assessing Officer and subsequently before the appellate authorities. It clarified that interference at the threshold may still be justified where there is a total absence of jurisdiction or a patent violation of a mandatory statutory pre-condition. However, it found that the present case did not fall within that category. It held:

"..Assessees would do well to allow the assessment or reassessment, as the case may be, to reach to its logical culmination, and thereafter avail the remedies provided under the Act in the sequence in which the Legislature has provided them, rather than approaching this Court at the very inception of the proceedings on objections that are, in substance, matters to be urged before and answered by the authorities under the Act itself."

Accordingly, the High Court dismissed the writ petition, leaving Nitin Enterprises to pursue its objections before the Assessing Officer and, if required, before the appellate authorities.

For Petitioner: Rutuja Pawar, Advocate 

For Respondent: Kamasuni Sudhakar Reddy, Advocate