Natural justice in reassessment requires full consideration of replies before issuing notice; quashed and remanded for fresh decision.

Natural justice requires the Assessing Officer, in proceedings under section 148A, to consider the assessee's reply and supporting materials before deciding whether notice under section 148 is warranted. The Calcutta HC found that the reassessment order relied on partial bank statements and alleged circular movement of funds, but did not deal with the assessee's explanations or address the materials furnished in response to the show cause notice. Because the specific replies were not considered and no detailed finding on escaped income was recorded, the section 148A(3) order and consequential section 148 notice were quashed, with the matter remanded for fresh consideration after hearing.

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Issues: Whether the reassessment order under section 148A(3) and the consequential notice under section 148 of the Income-tax Act, 1961 were sustainable when the assessee's replies and supporting materials were not duly considered and the formation of opinion on escaped income was challenged as violative of natural justice.

Analysis: The order proceeded on the basis of partial bank statements and circular movement of funds, but did not address the assessee's replies in their entirety or deal with the explanation and materials furnished in response to the show cause notice. In a proceeding under section 148A, the Assessing Officer is required to consider the reply and pass a reasoned determination on whether notice under section 148 is warranted. Non-consideration of the specific replies and absence of a detailed finding on the alleged escaped income vitiated the decision.

Conclusion: The impugned reassessment order and the consequential notice were quashed and set aside, and the matter was directed to be reconsidered afresh after affording an opportunity of hearing.

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