Tax reassessment after insurance-sector search: s.148A(3) order lacked reasons addressing objections, so s.148 notices quashed and remanded.

The dominant issue was whether reassessment initiation under the Income-tax Act was vitiated because the order under s.148A(3) failed to disclose reasons for rejecting the assessee's response and for forming "reasons to believe" that income had escaped assessment, beyond a bare reference to a search under s.132 in the insurance sector. The HC held that the s.148A(3) order was non-speaking and did not address the assessee's specific objections, including the plea that the notice material was incomplete; absence of articulated reasoning rendered the decision to issue s.148 notices unsustainable. Consequently, the impugned s.148A(3) order and the consequential s.148 notices were set aside and the matter was remanded to the AO to pass fresh, reasoned orders based on the assessee's replies.

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1. ISSUES PRESENTED AND CONSIDERED

1. Whether the orders passed under Section 148A(3) of the Income Tax Act, 1961 were unsustainable for want of reasons, particularly for not disclosing the grounds on which the Assessing Officer disagreed with the assessee's replies to the Section 148A(1) notices before issuing notices under Section 148.

2. Whether, in the circumstances of the case, the Assessing Officer was required to supply the information intended to be relied upon while deciding the proceedings initiated by notices under Section 148A(1), and to provide the assessee an opportunity to file additional reply after such disclosure.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Sustainability of the Section 148A(3) orders and consequential Section 148 notices in absence of reasons

Legal framework: The Court examined the statutory scheme under which notices are issued under Section 148A(1), an order is passed under Section 148A(3), and thereafter a notice under Section 148 may follow.

Interpretation and reasoning: The Court found, on perusal of the Section 148A(3) orders, that they did not reveal the grounds or reasons for disagreeing with the assessee's replies to the Section 148A(1) notices. The Court treated this deficiency as material, especially because the assessee had set out its explanation regarding the receipts referred to in the notices. The absence of reasons in the Section 148A(3) orders rendered the decision-making process non-speaking and, therefore, the consequential step of issuing notices under Section 148 could not be sustained.

Conclusions: The Section 148A(3) orders dated 29.06.2025 were set aside as unsustainable for being devoid of reasons, and the consequential notices under Section 148 of the same date were also set aside. The matters were remanded to the Assessing Officer to pass reasoned orders afresh on the basis of the replies already submitted to the Section 148A(1) notices.

Issue 2: Obligation to provide relied-upon information and opportunity to file additional reply

Legal framework: The Court addressed the requirement that the assessee be provided the information which the Assessing Officer intends to rely upon while deciding the proceedings initiated by notice under Section 148A(1).

Interpretation and reasoning: The Court noted the assessee's objection that the notices were incomplete for not providing complete information. It held that, while reconsidering the matter on remand, the Assessing Officer shall provide the information intended to be relied upon for deciding the Section 148A(1) notice proceedings. To preserve fairness in the decision-making process, the Court granted liberty to the assessee to file additional reply(ies) within two weeks from receipt of such information.

Conclusions: The Assessing Officer was directed to furnish the information proposed to be relied upon, permit additional reply within two weeks thereafter, and complete the remand exercise within eight weeks from receipt of the Court's order, whereafter parties were left to proceed in accordance with law.

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