The client is an individual running a retail hardware business as a proprietor, assessed at a ward in Indore. On 20 January 2026 a notice under s.148A(1) issued for AY 2022-23 saying that information available on the Insight Portal, risk category high, showed cash deposits of Rs 41,80,000 in a current account, and that no return of income appears to have been filed for the year. In fact a return was filed on 28 July 2022 declaring business income under s.44AD on a turnover of Rs 1,32,00,000, and the deposits are the cash component of that same turnover, banked in daily and weekly lots. Nothing was annexed to the notice beyond a one-line description of the flag. The reply window given is seven days. The client holds daily cash sales summaries, the current account statement, GST returns matching the declared turnover, and the acknowledgement of the return.
Before drafting a word on merits, test the two factual assertions the notice actually makes against the Department's own records: was a return filed for the year, and does the flagged figure correspond to something the return already discloses. Where the portal statement is contradicted by the Department's own record, the statutory trigger of information which suggests escaped income is simply absent, and the proceeding can be closed at the show-cause stage instead of being defended through an assessment and an appeal.
Reassessment initiated on information that is demonstrably incorrect and unsupported by any material cannot stand, and a High Court has quashed the show-cause notice, the resulting order, the s.148 notice and the demand together where the portal flag said no return was filed and one had been. The statutory trigger under the current regime is information which suggests escapement, and the library now sets out the statutory list of what counts as such information - which includes material gathered in accordance with the Board's risk management strategy, so do not argue that a portal entry cannot be information at all. If the information is factually wrong there is nothing to suggest anything. The point has to be made with the document attached, not asserted.
The information or material forming the basis for triggering the proceeding has to be furnished to the assessee, and an order passed without supplying it has been set aside and remitted. Where the notice describes an enquiry but nothing is attached, the Department has been held duty bound to provide all material information and the enquiry conducted along with supporting documents. Where an order carries adverse civil consequences the person affected must be given the material relied on against him. The library now draws the distinction the request should be built on - the risk category is a routing decision inside the department, while the information in the assessee's case is the underlying data - so ask for the source, the reporting entity and the transaction data by name, and not for the label.
A Division Bench has held that conducting the preliminary enquiry is discretionary for the Assessing Officer and not a mandatory precondition to the show-cause notice, and has upheld the order and the consequent notice on that footing. That is the answer the Department will give, and leading with the point wastes the reply and signals that the factual case is thin. The enquiry point is worth a sentence at most, and only as context for the demand for material.
A third-party information source is subject to error, and an addition made solely on such an entry without independent verification of the underlying facts has been deleted. Where the turnover is declared on the presumptive basis, the deposits are the receipts of that turnover and no separate explanation of each credit arises; the presumptive scheme replaces the book-keeping obligation it displaces. If the deposits are instead treated as unexplained the initial burden falls on the assessee to establish nature and source.
Reopening was quashed where the officer's conclusions were a reproduction of an investigation report with no independent application of mind and no demonstrated link between the material and the belief. That reasoning survives, but the vehicle has changed: under the current regime there are no reasons recorded to call for, and the same attack has to be aimed at the information relied on and at the order disposing of the reply.
If the deposits are ultimately held unexplained the charge is not at slab rates: sums brought to tax under the cash credit and unexplained investment family are taxed at a flat rate with a surcharge that takes the effective burden to roughly three quarters of the sum, with a separate penalty provision alongside. That is a very different exposure from a dispute about presumptive turnover, and the client should see both numbers before instructing.
Prior approval of the specified authority is a condition for issuing the notice as well as for the show-cause stage, and a reopening initiated by the wrong rank is not saved. Limitation is a hard outer boundary measured from the end of the relevant assessment year, and both the s.148 and the s.148A limits have to be checked separately. These points cost nothing to take and can end the matter without any factual contest.
Where the flag is provably wrong on the Department's own record, a large share of these are dropped at the s.148A stage, because the officer would have to record in the order that his own information is false. Where the officer instead supplies the underlying material and reframes the information, the matter usually proceeds to a s.148 notice and the fight becomes a routine cash-deposit dispute at assessment and then at CIT(A). A third pattern is a remand from a High Court on the non-supply ground, which resets the show-cause stage rather than ending it.