Calcutta High Court Quashes Section 148A(3) Order and Section 148 Notice: Non-Consideration of Assessee's Replies Renders Order Perverse and Without Jurisdiction
Case Overview
Case: Ojaswini Retailers Private Limited & anr. Vs Union of India & Ors.
Court: Calcutta High Court
Assessment Year: 2020-21
Impugned Order Date: 30 June 2025
Legislation: Section 148A(3) and Section 148 of the Income Tax Act, 1961
Background and Nature of Proceedings
A writ petition was filed before the Calcutta High Court assailing an order dated 30 June 2025 passed under Section 148A(3) of the Income Tax Act, 1961, along with the consequential notice of even date issued under Section 148 of the said Act for Assessment Year 2020-21. The petitioners sought judicial review on the ground that the Assessing Officer had committed a fundamental procedural error by proceeding to form a belief regarding escapement of income without meaningfully engaging with the replies and documentary evidence placed on record by the assessees.
The central question before the Court was whether the Assessing Officer had validly exercised the jurisdiction conferred under Section 148A(3) when the replies submitted by the petitioners had not been addressed in the order, and whether such non-consideration amounted to a violation of the principles of natural justice.
Facts of the Case
Transactions Under Scrutiny
The matter revolved around equity share transactions entered into by the petitioners during the relevant financial year. Specifically, the assessee company had received funds from two entities:
- M/s. Foremost Enterprises Pvt. Ltd. — amounting to Rs. 2,96,50,000/-
- M/s. Fantastic Hirise Pvt. Ltd. — amounting to Rs. 3,06,00,000/-
These amounts were stated to have been received against the sale of investments in the form of equity shares.
Show Cause Notice and Replies Filed
A show cause notice was issued to the petitioners under Section 148A(1) of the Income Tax Act, 1961, dated 19 March 2025. In response, the petitioners filed two detailed replies:
- Reply dated 14 April 2025
- Reply dated 19 June 2025
Along with these replies, the petitioners furnished the following supporting materials:
- Bank statements from Federal Bank Ltd. pertaining to the assessee's account
- Bank statements of M/s. Foremost Enterprise Pvt. Ltd. with IDBI Bank
- Copies of audited accounts for the relevant financial year pertaining to the assessee and both buyer entities
- Copies of sale bills and related transaction documents
The petitioners' consistent position was that all transactions had been routed through legitimate banking channels and were fully supported by documentary evidence. They argued that the mere fact that credits and debits occurred on the same day could not, by itself, lead to the conclusion that the transactions were accommodation entries or constituted money laundering.
Revenue's Contentions
Findings of the Investigation Wing
The Income Tax authorities resisted the writ petition, asserting that the petitioners' replies had indeed been considered. The Revenue placed reliance on specific paragraphs of the impugned order, which recorded the following:
"5.2. The assessee stated in its reply that it had received Rs. 2,96,50,000/- from M/s Foremost Enterprises Pvt. Ltd. and Rs. 3,06,00,000/- from M/s Fantastic Hirise Pvt. Ltd. against sale of investments (equity shares) during the relevant financial year. The assessee submitted (i) copy of bank statement only a few pages but not the complete bank statement of the assessee company as well as of one of the buyers namely M/s Foremost Enterprises Pvt Limited, (ii) the copy of audited accounts of the assessee company as well as of both the buyer for the concerned financial year, (iii) copy of sale bill etc. However, the assessee had not submitted FMV (Fair Market Value) of equity shares (being the investment)."