The officer passed the order under section 148A(d) without answering a single point in my reply. Can I get the reassessment quashed on that ground alone?
No, not on that ground alone. The Allahabad High Court held that section 148A does not oblige the Assessing Officer to deal with objections pointwise or to record detailed reasons. The old requirement of recording a 'reason to believe' has been done away with and replaced by a lighter, more subjective decision that it is a 'fit case' to issue a notice under section 148, on information that suggests escapement. The officer must not act whimsically, on extraneous material, or in ignorance of the reply, but an overall consideration is enough. Reading in a duty to give reasons for rejecting each objection would reintroduce 'reason to believe' by the back door. The petition was dismissed, with all merit defences left open.
Decided by the High Court (High Court of Judicature at Allahabad; Saumitra Dayal Singh J and Donadi Ramesh J) on 2024-05-15, reported as Neutral Citation 2024:AHC:87488-DB; Writ Tax No. 799 of 2024, Allahabad High Court. It bears on section 148A(d), section 148A, section 148A(b), section 148A(c), section 148, section 151 of the Income Tax Act 1961, in Reassessment & Reopening matters.
This is the answer a practitioner will meet when he challenges a section 148A(d) order as non-speaking, and it is worth knowing before the writ is drafted. The Court draws the line precisely: clauses (b), (c) and (d) of section 148A require that the officer not act whimsically or capriciously, not act on extraneous material, and not ignore the reply, but they do not require him to answer the reply objection by objection. It sets out the two things the order must show on a plain reading, that the concern about absence of information or relevant material, and the concern that no bona fide suggestion of escapement arises from it, have been addressed with application of mind. Anything beyond that, the Court says, would resurrect the pre-2021 test. It also confirms that the pre-amendment case law on 'reason to believe' is not merely distinguishable but irrelevant at this stage, and that all merit defences survive into the reassessment itself.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For assessment year 2020-21 the petitioner filed his regular return and no scrutiny assessment was made. On 19 February 2024 he was issued a show cause notice under section 148A(b). The annexure recorded information flagged under the Central Board of Direct Taxes' Risk Management Strategy that he had supplied goods or services worth Rs 7,39,68,000 during financial year 2019-20 to M/s Everett Infra and Engineering Equipments Private Limited, that departmental enquiries had established that company to be doing no actual business and providing accommodation entries by way of bogus contracts and sub-contracts and invoices without delivery, and that his supplies to it therefore appeared bogus and suggested escapement of income. He replied on 18 March 2024, relying on entries in his own books and other material to assert that he had actually sold goods to the purchaser, and on the purchaser's profit and loss account showing revenue receipts of over Rs 290 crores for the same year. He also pointed to details of the purchaser's activity and income on the Registrar of Companies website and to the company being active on the MCA portal. The Assessing Authority nevertheless passed an order under section 148A(d) dated 27 March 2024 and a notice under section 148 of the same date. The order relied on oral statements of entities recorded in other search proceedings not involving the petitioner or the purchaser, on successive reports of the Inspector of Income Tax, Central Circle-19, New Delhi, that no business activity was found at any of the purchaser's four addresses, and on the fact that notices and summons to the purchaser and its key person had gone unanswered.
The writ petition was dismissed. The Court held that the order under section 148A(d) could not be faulted. The information that the purchaser did not exist, contained in the Inspector's reports on the four addresses, was relevant, and the suggestion of escapement of income on sales made to a non-existent purchaser inhered in it. The petitioner had disclosed no direct evidence in his reply to doubt the existence of that information. The satisfaction was reinforced by the purchaser's failure to respond to notices and summons and by a third party's statement recorded in search proceedings, all of which the order had noted. The Court accepted that the officer had recorded no reason squarely dealing with the objection based on the Registrar of Companies records and the purchaser's active status on the MCA portal, but held that answering it was not a mandatory condition at that stage, and that in the absence of any legal obligation to record a categorical finding rejecting a particular objection at the preliminary stage, no fault existed in the initiation of reassessment. The Court declined to lay down a stricter test than the statute prescribes. It directed that the assessment proceedings continue and be concluded strictly in accordance with law without being prejudiced by any observation in the order, leaving all merit objections and defences open, and made no order as to costs.
The Court began by clearing away the old law. The pre-existing rule required relevant material indicating escapement, application of mind to that material, reasons entertained on it, and a belief formed on those reasons that income had escaped assessment. That rule no longer exists, so the precedents built on it are neither relevant nor for consideration at this stage. It then read section 148A as it now stands. The pre-conditions are information or objective material that suggests escapement, an enquiry with prior approval if required, a show cause notice giving the assessee an opportunity to respond, and a decision by the officer, on that material and the reply, that it is a fit case to issue a notice under section 148. The legislature has, in the Court's words, carefully departed from the strict test of recording a reason to believe and substituted a lighter and more subjective decision that it is a fit case, resting on a suggestion emerging from the information. From that reading two limits followed. The officer must consider only relevant and not extraneous material, and must consider the reply; but it is not the statutory law that he must record specific or objective reasons dealing with each and every objection raised. The statute requires an overall or broad consideration of the reply. To read the recording of exact reasons for rejecting an objection into section 148A would be to reintroduce indirectly a requirement that has been specifically and completely done away with. Reading clauses (b), (c) and (d) together, the officer may not act whimsically, capriciously, on extraneous material, or in ignorance of the reply, but need not deal pointwise with individual objections or give detailed reasons. What must be visible on a plain reading of the order is that the assessee's concern, whether about the absence of information or about the lack of a bona fide and prudent suggestion arising from it, has been addressed with application of mind. So long as the exercise is bona fide and not mindless, perverse or patently contrary to law, and so long as the decision is not disjointed from or contrary to the suggestion arising from the information, no minute examination of it is called for. Applying that, the information about the purchaser's non-existence was relevant, the suggestion of escapement inhered in it, and the decision stood.
To read-recording of exact reasons (to reject any objection), into the language of Section 148A of the Act would be to indirectly reintroduce the requirement to record "reasons to believe", as a pre-condition to initiate reassessment proceedings
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Handle my notice → Ask a CA on WhatsAppNo, not on that ground alone. The Allahabad High Court held that section 148A does not oblige the Assessing Officer to deal with objections pointwise or to record detailed reasons. The old requirement of recording a 'reason to believe' has been done away with and replaced by a lighter, more subjective decision that it is a 'fit case' to issue a notice under section 148, on information that suggests escapement. The officer must not act whimsically, on extraneous material, or in ignorance of the reply, but an overall consideration is enough. Reading in a duty to give reasons for rejecting each objection would reintroduce 'reason to believe' by the back door. The petition was dismissed, with all merit defences left open. This was decided by the High Court (High Court of Judicature at Allahabad; Saumitra Dayal Singh J and Donadi Ramesh J) and bears on section 148A(d), section 148A, section 148A(b), section 148A(c), section 148, section 151 of the Income Tax Act 1961. It is reported as Neutral Citation 2024:AHC:87488-DB; Writ Tax No. 799 of 2024, Allahabad High Court. This is the answer a practitioner will meet when he challenges a section 148A(d) order as non-speaking, and it is worth knowing before the writ is drafted. The Court draws the line precisely: clauses (b), (c) and (d) of section 148A require that the officer not act whimsically or capriciously, not act on extraneous material, and not ignore the reply, but they do not require him to answer the reply objection by objection. It sets out the two things the order must show on a plain reading, that the concern about absence of information or relevant material, and the concern that no bona fide suggestion of escapement arises from it, have been addressed with application of mind. Anything beyond that, the Court says, would resurrect the pre-2021 test. It also confirms that the pre-amendment case law on 'reason to believe' is not merely distinguishable but irrelevant at this stage, and that all merit defences survive into the reassessment itself. If it applies to you, the first step is this: Attack the information rather than the drafting: show that the material does not exist, is extraneous, or cannot bear the suggestion of escapement, because that is the ground the Court left open.
For assessment year 2020-21 the petitioner filed his regular return and no scrutiny assessment was made. On 19 February 2024 he was issued a show cause notice under section 148A(b). The annexure recorded information flagged under the Central Board of Direct Taxes' Risk Management Strategy that he had supplied goods or services worth Rs 7,39,68,000 during financial year 2019-20 to M/s Everett Infra and Engineering Equipments Private Limited, that departmental enquiries had established that company to be doing no actual business and providing accommodation entries by way of bogus contracts and sub-contracts and invoices without delivery, and that his supplies to it therefore appeared bogus and suggested escapement of income. He replied on 18 March 2024, relying on entries in his own books and other material to assert that he had actually sold goods to the purchaser, and on the purchaser's profit and loss account showing revenue receipts of over Rs 290 crores for the same year. He also pointed to details of the purchaser's activity and income on the Registrar of Companies website and to the company being active on the MCA portal. The Assessing Authority nevertheless passed an order under section 148A(d) dated 27 March 2024 and a notice under section 148 of the same date. The order relied on oral statements of entities recorded in other search proceedings not involving the petitioner or the purchaser, on successive reports of the Inspector of Income Tax, Central Circle-19, New Delhi, that no business activity was found at any of the purchaser's four addresses, and on the fact that notices and summons to the purchaser and its key person had gone unanswered. The matter was decided on 2024-05-15 by the High Court (High Court of Judicature at Allahabad; Saumitra Dayal Singh J and Donadi Ramesh J). On those facts the High Court held as follows. The writ petition was dismissed. The Court held that the order under section 148A(d) could not be faulted. The information that the purchaser did not exist, contained in the Inspector's reports on the four addresses, was relevant, and the suggestion of escapement of income on sales made to a non-existent purchaser inhered in it. The petitioner had disclosed no direct evidence in his reply to doubt the existence of that information. The satisfaction was reinforced by the purchaser's failure to respond to notices and summons and by a third party's statement recorded in search proceedings, all of which the order had noted. The Court accepted that the officer had recorded no reason squarely dealing with the objection based on the Registrar of Companies records and the purchaser's active status on the MCA portal, but held that answering it was not a mandatory condition at that stage, and that in the absence of any legal obligation to record a categorical finding rejecting a particular objection at the preliminary stage, no fault existed in the initiation of reassessment. The Court declined to lay down a stricter test than the statute prescribes. It directed that the assessment proceedings continue and be concluded strictly in accordance with law without being prejudiced by any observation in the order, leaving all merit objections and defences open, and made no order as to costs.
The Court began by clearing away the old law. The pre-existing rule required relevant material indicating escapement, application of mind to that material, reasons entertained on it, and a belief formed on those reasons that income had escaped assessment. That rule no longer exists, so the precedents built on it are neither relevant nor for consideration at this stage. It then read section 148A as it now stands. The pre-conditions are information or objective material that suggests escapement, an enquiry with prior approval if required, a show cause notice giving the assessee an opportunity to respond, and a decision by the officer, on that material and the reply, that it is a fit case to issue a notice under section 148. The legislature has, in the Court's words, carefully departed from the strict test of recording a reason to believe and substituted a lighter and more subjective decision that it is a fit case, resting on a suggestion emerging from the information. From that reading two limits followed. The officer must consider only relevant and not extraneous material, and must consider the reply; but it is not the statutory law that he must record specific or objective reasons dealing with each and every objection raised. The statute requires an overall or broad consideration of the reply. To read the recording of exact reasons for rejecting an objection into section 148A would be to reintroduce indirectly a requirement that has been specifically and completely done away with. Reading clauses (b), (c) and (d) together, the officer may not act whimsically, capriciously, on extraneous material, or in ignorance of the reply, but need not deal pointwise with individual objections or give detailed reasons. What must be visible on a plain reading of the order is that the assessee's concern, whether about the absence of information or about the lack of a bona fide and prudent suggestion arising from it, has been addressed with application of mind. So long as the exercise is bona fide and not mindless, perverse or patently contrary to law, and so long as the decision is not disjointed from or contrary to the suggestion arising from the information, no minute examination of it is called for. Applying that, the information about the purchaser's non-existence was relevant, the suggestion of escapement inhered in it, and the decision stood. In the words reproduced by the source cited on this page: "To read-recording of exact reasons (to reject any objection), into the language of Section 148A of the Act would be to indirectly reintroduce the requirement to record "reasons to believe", as a pre-condition to initiate reassessment proceedings"
It was decided by the High Court on 2024-05-15 and is reported as Neutral Citation 2024:AHC:87488-DB; Writ Tax No. 799 of 2024, Allahabad High Court. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 148A(d), section 148A, section 148A(b), section 148A(c), section 148, section 151, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The writ petition was dismissed. The Court held that the order under section 148A(d) could not be faulted. The information that the purchaser did not exist, contained in the Inspector's reports on the four addresses, was relevant, and the suggestion of escapement of income on sales made to a non-existent purchaser inhered in it. The petitioner had disclosed no direct evidence in his reply to doubt the existence of that information. The satisfaction was reinforced by the purchaser's failure to respond to notices and summons and by a third party's statement recorded in search proceedings, all of which the order had noted. The Court accepted that the officer had recorded no reason squarely dealing with the objection based on the Registrar of Companies records and the purchaser's active status on the MCA portal, but held that answering it was not a mandatory condition at that stage, and that in the absence of any legal obligation to record a categorical finding rejecting a particular objection at the preliminary stage, no fault existed in the initiation of reassessment. The Court declined to lay down a stricter test than the statute prescribes. It directed that the assessment proceedings continue and be concluded strictly in accordance with law without being prejudiced by any observation in the order, leaving all merit objections and defences open, and made no order as to costs. It arises in Reassessment & Reopening matters, on section 148A(d), section 148A, section 148A(b), section 148A(c), section 148, section 151 of the Income Tax Act 1961, and was decided by High Court of Judicature at Allahabad; Saumitra Dayal Singh J and Donadi Ramesh J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put direct evidence on record with the section 148A(b) reply; here the Court noted that the petitioner produced no direct evidence to doubt the Inspector's reports that the purchaser did not exist at any of its four addresses. Do not rest the writ on the order being non-speaking or on failure to answer a particular objection; on this reasoning that is not by itself a jurisdictional defect. Keep the merits for the reassessment: the Court expressly preserved all defences and directed that the proceedings continue unprejudiced by its observations.
Still good law. A reportable Division Bench judgment of 15 May 2024, neutral citation 2024:AHC:87488-DB, construing section 148A as substituted with effect from 1 April 2021. The source page records no case citing it. Other High Courts have taken varying views on how far a section 148A(d) order must be reasoned; that divergence was not surveyed in this session, and whether this judgment has been carried further was not checked. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment leaves untouched the petitioner's strongest factual point, that the purchaser had declared revenue receipts of over Rs 290 crores and remained active on the MCA portal; it holds only that the officer was not obliged to answer it at the section 148A(d) stage, not that the point is bad. It does not consider the reliance placed in the section 148A(d) order on statements recorded in search proceedings to which neither the petitioner nor the purchaser was a party, nor whether such material could be used without being confronted. It says nothing about approval under section 151, which is the other common ground of challenge. Because the petition was dismissed at the threshold, the reassessment itself remained to be made and its outcome is not known. The batch line gave the sections as 148A, 148A(b), 148A(c), 148A(d) and 148, which matches; section 151 appears only in the Explanation extracted. This is one High Court's reading of how much reasoning section 148A(d) demands, and it was not checked in this session against the contrary line taken elsewhere. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ petition was dismissed. The Court held that the order under section 148A(d) could not be faulted. The information that the purchaser did not exist, contained in the Inspector's reports on the four addresses, was relevant, and the suggestion of escapement of income on sales made to a non-existent purchaser inhered in it. The petitioner had disclosed no direct evidence in his reply to doubt the existence of that information. The satisfaction was reinforced by the purchaser's failure to respond to notices and summons and by a third party's statement recorded in search proceedings, all of which the order had noted. The Court accepted that the officer had recorded no reason squarely dealing with the objection based on the Registrar of Companies records and the purchaser's active status on the MCA portal, but held that answering it was not a mandatory condition at that stage, and that in the absence of any legal obligation to record a categorical finding rejecting a particular objection at the preliminary stage, no fault existed in the initiation of reassessment. The Court declined to lay down a stricter test than the statute prescribes. It directed that the assessment proceedings continue and be concluded strictly in accordance with law without being prejudiced by any observation in the order, leaving all merit objections and defences open, and made no order as to costs.
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