Case Details
Case Title: Ojaswini Retailers Private Limited & Anr. v. The Union of India & Ors.
Court: High Court at Calcutta
Case No.: WPA 19078 of 2025
Date of Decision: 11 June 2026
Coram: Justice Smita Das De
Assessment Year: 2019–20
The Calcutta High Court has quashed an order passed under Section 148A(3) of the Income Tax Act, 1961 and the consequential reassessment notice issued under Section 148 after finding that the Assessing Officer had failed to consider the assessee’s replies and supporting materials in their entirety.
The writ petition was filed by Ojaswini Retailers Private Limited and another petitioner challenging the order dated 30 June 2025 passed under Section 148A(3) and the consequential notice issued on the same date for Assessment Year 2019–20.
The principal issue before the Court was whether the Assessing Officer had validly formed the opinion that income chargeable to tax had escaped assessment without properly considering the explanations and documents submitted by the petitioners.
Assessee’s Replies Not Considered in Their Entirety
The petitioners submitted that they had filed detailed replies dated 11 April 2025 and 19 June 2025 in response to the show-cause notice issued under Section 148A(1). According to them, the impugned order was passed without dealing with the explanations contained in those replies.
The petitioners had produced bank statements and other documents in support of transactions undertaken with Dhansidhi Developers Private Limited and Foremost Enterprise Private Limited. They contended that the transactions had been conducted through recognised banking channels and could not be treated as accommodation entries merely because funds were credited and transferred on the same day or within a short period.
The Income Tax Department, on the other hand, maintained that only partial bank statements had been furnished. The Assessing Officer had observed that substantial amounts were credited and debited on the same day or immediately thereafter, leaving minimal balances in the accounts. On that basis, the transactions were considered indicative of circular movement of funds and lacking in commercial substance.
Formation of Belief Must Be Based on Proper Consideration
After examining the record, the High Court observed that the Assessing Officer had referred to the partial bank statements but had not dealt with the explanations offered by the petitioners in their replies.
The Court held that a mere reference to circular transactions, without analysing the commercial rationale of the transactions or the materials furnished by the assessee, could not sustain the formation of belief required under Section 148A(3).
The statutory procedure under Section 148A requires the Assessing Officer to consider the reply submitted by the assessee and thereafter pass a reasoned order determining whether it is a fit case for issuance of a notice under Section 148.
Where specific replies and supporting documents have been submitted, their non-consideration vitiates the decision-making process and amounts to a violation of the principles of natural justice.
Fresh Examination Directed
The High Court clarified that the genuineness and creditworthiness of the transactions with Dhansidhi Developers Private Limited and Foremost Enterprise Private Limited required fresh examination after granting an effective opportunity of hearing.
Accordingly, the Court quashed the order dated 30 June 2025 passed under Section 148A(3) as well as the consequential notice issued under Section 148.
The Assessing Officer was directed to revisit the issue, examine the genuineness of the transactions and pass a reasoned order in accordance with law after providing an opportunity of hearing to the petitioners and other beneficiaries.
The petitioners were also directed to produce complete banking statements to establish that the alleged circular movement of funds represented genuine transactions.
The entire exercise was directed to be completed by 15 July 2026, with the decision to be communicated to the petitioners within one week thereafter.
Key Judicial Principle
An order under Section 148A(3) cannot be sustained where the Assessing Officer fails to consider the assessee’s specific replies and supporting materials. Mere reference to circular movement of funds, without examining the commercial rationale and evidence placed on record, is insufficient to justify the formation of belief that income has escaped assessment.
Decision
The writ petition was disposed of. The order passed under Section 148A(3) and the consequential notice issued under Section 148 were quashed and set aside. The matter was remanded to the Assessing Officer for fresh consideration after granting an effective opportunity of hearing.