Orissa High Court Annuls Reassessment Where Facts of Different Assessment Year Were Used
Background and Context of the Dispute
The Orissa High Court in Monika Sharma Vs Assessing Officer (Orissa High Court) examined the validity of a reassessment concluded under Section 147 read with Sections 144 and 144B of the Income Tax Act, 1961 for Assessment Year 2018-19 (previous year 2017-18). The assessment had been conducted through the faceless assessment framework.
The assessee approached the High Court by way of a writ petition, seeking:
- Quashing of the reassessment order dated 9th February, 2026,
- Setting aside the corresponding demand notice,
- Annulment of the notice issued under
Section 148A(b), and - Quashing of the order passed under
Section 148A(d).
At the heart of the dispute was a crucial procedural defect: the show-cause notice proposing variations in income expressly referred to assessment proceedings for a different Assessment Year (2024-25), even though the reassessment was undeniably in respect of Assessment Year 2018-19. The High Court was called upon to decide whether such a mismatch in assessment years, coupled with ambiguity about the facts and figures relied on, vitiated the reassessment order.
Initiation of Reassessment Proceedings under Section 147
The reassessment was triggered by a notice under Section 148A(b) alleging that the assessee had claimed bogus input tax credit in Assessment Year 2018-19. Pursuant to this:
- A notice under
Section 148A(b)was issued to the assessee, calling for an explanation and supporting material regarding the alleged ineligible input tax credit. - After considering the initial response of the assessee, the Assessing Officer passed an order dated 29th August, 2024 under
Section 148A(d), concluding that it was a fit case to issue a notice underSection 148. - Thereafter, reassessment proceedings for A.Y. 2018-19 were formally initiated and carried out through the faceless assessment mechanism, with further notices being issued, including under
Section 142.
The assessee contended that all relevant documents, including invoices and supporting records relating to transactions under the Central Goods and Services Tax Act, 2017 and the Odisha Goods and Services Tax Act, 2017, were duly uploaded on the faceless portal in response to the notices.
The Critical Show-Cause Notice Dated 7th January, 2026
A key document in the proceedings was the show-cause notice dated 7th January, 2026, issued through the faceless assessment system and containing the proposed variations to the returned income.
The assessee highlighted that paragraph 4.1 of this notice specifically recorded:
“This has reference to the assessment proceedings for A.Y. 2024-25. On perusal of the paper book and other details filed by assessee, the following variation has been proposed.”
This wording became the foundation of the challenge in the writ petition. The assessee argued that:
- The entire reassessment was initiated and conducted for A.Y. 2018-19.
- Despite this, the show-cause notice explicitly referred to assessment proceedings for A.Y. 2024-25.
- The proposed variations, therefore, appeared to be based on facts, figures and records relating to a different assessment year.
- Using material and computations of one assessment year while framing an order for another assessment year was fundamentally impermissible and went to the root of the legality of the reassessment.
On this basis, the assessee asserted that the assessment order dated 9th February, 2026 stood vitiated in law.