Section 148A orders and Section 148 notices set aside for reconsideration of the taxpayer’s explanation.

The petitioner partnership firm challenged, in two connected petitions, orders under Section 148A(3), prior-approval orders under Sections 148A(3) and 151, and notices under Section 148 of the Income Tax Act, 1961, concerning alleged undisclosed business turnover of ₹72,79,580 for AY 2021–22 and ₹82,24,948 for AY 2022–23.

The firm contended that it had responded to the show-cause notices by explaining that the transactions were unsecured loans, providing ledger accounts and relevant bank statements, and offering further information; it attributed concerns about the statements to a typographical error and said it could provide lender confirmations if asked.

The Court heard the parties on whether it should intervene and considered its approach in a similar matter.

1. Whether the orders under Section 148A(3) and the consequential notices under Section 148 should be quashed where the petitioner disputed the basis for rejecting its explanation and sought an opportunity to provide further details and lender confirmations.

2. Whether the prior-approval orders should also be quashed in the circumstances of these cases.

The Court considered Sections 147, 148, 148A(1), 148A(3), and 151 of the Income Tax Act, 1961.

The proceedings under Section 148A concern consideration of the assessee’s response before deciding whether the case is fit for reassessment; the Court’s approach was to allow the assessee to provide further clarification and require the assessing officer to consider the explanation before that question is determined.

The petitioner had asserted that the impugned orders relied on incorrect bank statements, a mismatch, and the absence of lender confirmations, despite its explanation that the relevant credits were unsecured loans rather than turnover.

The Court considered that the fitness of the cases for reassessment could be assessed after the petitioner had an opportunity to provide confirmations and any further details requested by the assessing officer.

Although it noted that there could be “some amiss” in the prior-approval process, it did not decide that question separately; instead, it quashed the impugned proceedings and directed reconsideration in light of the petitioner’s explanation.

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

The petitioner was directed to appear before the second respondent, the Income Tax Officer, Ward 1 and TPS, Udupi, on 16 October 2026, and could submit further clarification as requested; the officer was directed to consider the explanation in light of the Court’s observations.