UDAI RAJ CHORDIA vs. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE -1(1)(1)

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WP/25261/2026HC KarnatakaKAHC01055514202614 August 2026Author: B M SHYAM PRASAD9 pages
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What did the High Court hold?

The High Court allowed the petition in part. It quashed the impugned order dated 29.06.2026 under Section 148A(3) and the notice dated 29.06.2026 under Section 148 of the Income Tax Act, 1961. The Court reasoned that a jurisdictional Assessing Officer must examine the material on record and consider the assessee's reply to conclude that reassessment is fit. The Court noted that the Assessing Officer had not adequately examined the petitioner's computation of income for AY 2023-24, which declared a much higher sum while claiming only 10% expenditure. The proceedings were restored to the first respondent for due consideration. The petitioner was directed to appear before the first respondent on 27.09.2026, who would then consider the fitness of issuing a notice under Section 148 in light of the Court's observations. The principle is that reassessment proceedings require definite information and cannot be based on a 'roving or fishing enquiry', and the assessee's response must be duly considered.

What were the facts?

The petitioner, Udai Raj Chordia, is challenging reassessment proceedings initiated for Assessment Year 2023-24. The petitioner claims to have provided marketing support services to Tata AIG General Insurance Company Limited and Bajaj Alliance General Insurance Company Limited, declaring a total income of Rs. 2,29,93,126/- from these services, while claiming 10% of receipts as expenditure. The petitioner's grievance stems from the issuance of a notice under Section 148A(3) of the Income Tax Act, 1961, dated 29.06.2026, and a subsequent notice under Section 148 of the Act, dated 29.06.2026, by the Assistant Commissioner of Income Tax. The petitioner contends that these notices were issued without properly considering their response, which detailed the declaration of income and provided supporting documents.

What were the issues?

1. Whether the order passed under Section 148A(3) of the Income Tax Act, 1961, and the consequential notice under Section 148 of the Act, are valid, considering the petitioner's response and the material on record. The assessee (petitioner) argued that they had declared all receipts from Tata AIG General Insurance Company and Bajaj Alliance General Insurance Company, and therefore, there was no escapement of assessment. They emphasized that their reply, detailing the circumstances and providing documentary evidence, was not adequately considered by the first respondent before issuing the order under Section 148A(3) and the subsequent notice under Section 148. The revenue (respondents) contended that the first respondent's opinion, which doubted the genuineness and nature of the receipts due to findings in search and seizure operations on Middle Layer Business Entities (MLBEs), should be examined. They argued that if the petitioner cannot justify the expenses claimed, reassessment proceedings under Section 148 are justified.

Which sections of the Income-tax Act were involved?

Section 148A,Section 147,Section 148

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 14TH DAY OF AUGUST, 2026 BEFORE THE HON'BLE MR. JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 25261 OF 2026 (T-IT) BETWEEN:

UDAI RAJ CHORDIA S/O PUSHPCHAND CHORDIA AGED ABOUT 27 YEARS R/AT NO.1156, 12TH MAIN, 4TH CROSS, HAL 2ND STAGE INDIRANAGAR, BANGALORE 560038. …PETITIONER (BY SRI. NARENDRA KUMAR J JAIN., ADVOCATE FOR SMT. GEETHA RANI K.,ADVOCATE)

AND:

1.

THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE -1(1)(1) BMTC BUILDING, 80,FEET ROAD KORAMANGALA, BANGALOR 560095.

2.

THE ADDITIONAL COMMISSIONER OF INCOME TAX (RANGE)1 (1) BMTC BUILDING, 80 FEET ROAD, KORAMANGALA BANGALORE 560095. …RESPONDENTS (BY SRI.M. DILIP., ADVOCATE)

Digitally signed by VANAMALA N Location: HIGH COURT OF KARNATAKA

THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH AS FAR AS THE PETITIONER IS CONCERNED BY AN APPROPRIATE WRIT OR ORDER IN THE NATURE OF CERTIORARI OR OTHERWISE THE IMPUGNED UNDER SECTION 148A(3) OF THE ACT VIDE ITBA/AST/F/148A/2026-27/1090563045(1) DATED PASSED BY THE LEARNED FIRST RESPONDENT FOR AY 2023-24, ENCLOSED AS ANNEXURE A; B. QUASH AS FAR AS THE PETITIONER IS CONCERNED BY AN APPROPRIATE WRIT OR ORDER IN THE NATURE OF CERTIORARI OR OTHERWISE THE IMPUGNED NOTICE UNDER SECTION 148 OF THE ACT VIDE ITBA/AST/S/148_1/2026- 27/1090563149(1) DATED 29.06.2026 ISSUED BY THE LEARNED FIRST RESPONDENT FOR AY 2023-24, ENCLOSED AS ANNEXURE B.

THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER:

CORAM: HON'BLE MR. JUSTICE B M SHYAM PRASAD

ORAL ORDER

The petitioner asserts that it has rendered marketing support services for M/s. Tata AIG General Insurance Company Limited and to M/s. Bajaj Alliance General Insurance Company Limited during the Assessment Year 2023-24, and that it has offered a total sum of Rs.2,29,93,126/- as income from marketing support services claiming an expenditure of 10% of the receipts.

2.

The petitioner's grievance is with the commencement proceedings for reassessment under Section 147 of the Income Tax Act, 1961 [for short, ‘the Act’] with the issuance of Notice [Annexure-A] Section 148A of the Act. The petitioner's grievance is also with reassessment proceedings commenced with the Notice dated 29.06.2026 [Annexure-B] under Section 148 of the Act and the

Notice 25.03.2026 [Annexure-C] Section 148A[1] of the Act.

3.

Sri Narendra Kumar J Jain, the learned counsel for the petitioner, submits that the petitioner, when issued with the Notice under 148A[1] of the Act, has filed Reply detailing the afore circumstances emphasizing that petitioner has declared the receipts from M/s. Tata AIG General Insurance Company as also from M/s. Bajaj Alliance General Insurance Company and therefore there is no escapement assessment but the first respondent, after the Order under Section 148A[3] of the Act on 29.06.2026, has caused the Notice under Section 148 of the Act without considering the petitioner's response opining that the documentary evidence furnished by the petitioner as proof of receipt from M/s. Tata AIG General Insurance Company will not be sufficient.

4.

Sri M Dilip, a learned standing counsel for the respondents who accepts notice for the respondents, is heard on whether this Court must interfere with the Order dated 29.06.2026 under Section 148A[3] of the Act and the consequential Notice under Section 148 of the Act restoring the proceedings for reconsideration under Section 148A[2] of the Act. The learned counsel submits that the first respondent's opinion must be examined in the backdrop of the expenses that is claimed by the petitioner and if the petitioner cannot justify the expenses, there could be justification for reassessment proceedings under Section 148 of the Act.

5.

The first respondent's conclusions, as seen in the impugned order dated 29.06.2026, are as under. “The submissions file by the assessee have been carefully perused and the same are

not accepted. The assessee has explained that the amount of Rs.1,36,18,476/ received from Tata AIG General Insurance Company represents consideration towards market support services. In support of the claim, the assessee has furnished ledger extracts, invoices, bank Statements, Form 26AS and other relevant records. However, it is seen from the findings of Search and seizure u/s 132 on Middle Layer Business Entities (MLBEs) of Insurance Sector conducted on 30.11.2022 by Investigation Unit -1 and Unit-5, Mumbai under names Wings Brand Group and Ajay Mehta group respectively that the Middle Layers entities (MLBEs) receives funds from insurance companies in the disguise of business promotion and simply transferred amount to various parties by debiting expenses under different heads including business promotion.

In this regard, the documentary evidence furnished by the assessee is not sufficient, to conclusively establish the genuineness and nature of the impugned receipts. In view of the findings recorded during the search and seizure Proceedings in the case

of Middle Layer Business Entities (MLBEs), the claim of the assessee requires further verification with reference to the actual nature of services rendered, supporting agreements and the services claimed to have been provided. Accordingly, the claim of the assessee cannot be accepted at this stage and warrants detailed verification in light of the investigation findings."

The first respondent has doubted the transaction on the ground that the documents furnished would not justify the expenditure claimed. It is trite, even under the new regime, that there cannot be a roving or a fishing enquiry and the notice under Section 148 of the IT Act must be issued on definite information.

6.

A Jurisdictional Assessing Officer must examine the material available on record and consider the Reply thereof in a given case to conclude that it is a fit case for reassessment for issue of notice under Section 148 of the IT Act.

Further, this Court, on reading the Computation Income filed by petitioner for Assessment Year 2023-24, must observe that the petitioner has not just claimed the receipts received towards marketing support services but has also declared a much higher sum while claiming expenditure of just 10% of the total receipts. The Jurisdictional Assessing Officer [the first respondent] has not examined these which are part of the petitioner’s response. Hence, the following. ORDER [a] The petition is allowed-in-part.

[b] The first respondent’s impugned Order [Annexure-A] Section 148A[3] of the Act, the Notice dated 29.06.2026 [Annexure-B] under Section 148 of the Act are quashed restoring the

proceedings to the first respondent for due consideration. [c] The petitioner without further notice shall appear before the first respondent on 27.09.2026 and the first respondent shall consider the fitness of issuing a notice under Section 148 of the IT Act in the light of this Court's observations as aforesaid.

Sd/- (B M SHYAM PRASAD) JUDGE

AN/-

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