Reassessment fitness must be reconsidered after evaluating the taxpayer’s explanation and permitting further clarification.

The petitioner challenged, in two connected writ petitions concerning Assessment Years 2023–24 and 2024–25, orders under Section 148A(3), prior-approval orders, and notices under Section 148 of the Income-tax Act, 1961.

The proceedings followed show-cause notices under Section 148A(1), issued on 29 March 2026, concerning alleged escaped income inferred from bank credits and the difference between those credits and the income returned.

The petitioner responded that the credits included advances and supplied details of the entities said to have made them, together with financial statements; it also offered to provide further information if required.

The assessing officer rejected the explanation in part because confirmations from the relevant parties had not been furnished, without first seeking the further details offered by the petitioner.

1. Whether the orders under Section 148A(3) and the consequential notices under Section 148 should be set aside where the petitioner’s explanation about bank credits and advances was rejected without seeking further clarification.

2. Whether the prior-approval orders disclosed a procedural deficiency warranting interference by the Court.

Sections 147, 148, 148A and 151 of the Income-tax Act, 1961 govern reassessment, the notice initiating reassessment, the preliminary inquiry and opportunity to respond, and the requisite prior approval, respectively.

The Court proceeded on the basis that the question whether a case is fit for reassessment should be determined after considering the taxpayer’s explanation, with an opportunity to provide further clarification where required.

The judgment cites no statutory interpretation or precedent establishing a broader rule; it refers to an earlier order of the same Court as a similar instance in which proceedings were remitted for reconsideration.

The petitioner had explained that bank credits included advances and had offered to provide further supporting information, but the officer’s stated reason for rejecting the response was the absence of confirmations from the relevant parties.

In view of the opportunity to furnish those confirmations or other clarification, the Court considered reconsideration appropriate before the fitness of the cases for reassessment was determined.

Although the Court noted that there “could be some amiss” in the prior-approval process, it did not decide that issue on its merits; it instead set aside the challenged proceedings and directed reconsideration.

The Court quashed the Section 148A(3) orders, the prior-approval orders, and the Section 148 notices in both matters.

It directed the petitioner to appear, without further notice, before the officer identified in the order as the Income Tax Officer, Ward 1 and TPS, Udupi, on 30 October 2026, and permitted it to file further clarification that the officer might seek; the officer was directed to consider the petitioner’s explanation in light of the Court’s observations.