MODINNO INNOVATIONS INDIA PVT. LTD. vs. ADDITIONAL COMMISSIONER OF INCOME TAX,

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WP/29627/2026HC KarnatakaKAHC01064788202606 October 2026Bench: B M SHYAM PRASAD10 pages
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What did the High Court hold?

The High Court allowed the petitions in part. It quashed the Order under Section 148A(3), the Prior Approval Order under Sections 148A(3) and 151, and the Notice under Section 148. The Court acknowledged potential procedural irregularities in how the prior approval was obtained. However, instead of outright quashing the reassessment proceedings, the Court set aside the impugned orders and notice to allow the petitioner an opportunity to file confirmations from the parties who provided advances and to furnish any further details required for assessing the fitness of the case for reassessment under Section 147. The petitioner was directed to appear before the Income Tax Officer on 30.10.2026 for this purpose, with the officer directed to consider the explanation in light of the Court's observations. The Court did not expressly leave any issue undecided.

What were the facts?

The petitioner, Modinno Innovations India Pvt. Ltd., filed two writ petitions challenging orders and notices issued by the Additional Commissioner of Income Tax and the Income Tax Officer concerning Assessment Years 2023-24 and 2024-25. The proceedings were initiated under Section 148A(1) of the Income Tax Act, 1961, based on alleged escaped income due to discrepancies in bank credits and Income Tax Returns (ITR). The petitioner responded by stating that bank credits included advances and offered to provide further details. However, the Adjudication Order under Section 148A(3) was passed, deeming the response insufficient for lack of confirmations. The petitioner also noted that the prior approval under Section 151 was obtained before the show cause notice was issued.

What were the issues?

1. Whether the Adjudication Order under Section 148A(3) of the Income Tax Act, 1961, is sustainable when the petitioner offered to provide further clarifications and documents, and the assessment of fitness for reassessment was made without considering such offers, and despite the prior approval under Section 151 being obtained prior to the notice under Section 148A(1)? (Question of law and mixed fact and law, turning on Sections 148A and 151). Assessee's Contentions: - The bank credits should not be treated as turnover as they include advances received. - The petitioner furnished details of entities providing advances, their balance sheets, and P&L reports, and offered to provide further clarification. - The Adjudication Order was passed without considering these offers and despite the petitioner's willingness to furnish more documents. - The prior approval under Section 151 was obtained even before the notice under Section 148A(1), which is procedurally incorrect. Revenue's Contentions: - The revenue did not explicitly state its contentions in the provided text, but the court heard the standing counsel on whether it must interfere and on what terms.

Which sections of the Income-tax Act were involved?

Section 148A,Section 151,Section 148,Section 147

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Heard together (2 matters)

WP No. 29486 of 2026
WP No. 29627 of 2026

Read from the judgment's own cause title. This page is filed under one of them.

HC-KAR IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 6TH DAY OF OCTOBER, 2026 BEFORE THE HON'BLE MR. JUSTICE B M SHYAM PRASAD WRIT PETITION NO. 29486 OF 2026 (T-IT) C/W WRIT PETITION NO. 29627 OF 2026 (T-IT)

IN WP No. 29486/2026

BETWEEN:

MODINNO INNOVATIONS INDIA PVT. LTD. A COMPANY REGISTERED UNDER THE COMPANIES ACT, 2013 HAVING ITS REGISTERED OFFICE AT NO. 9-83/M2, MODINNO INNOVATIONS PVT. LTD., CITY POINT COLLEGE ROAD, BYNDOOR, UDUPI, KARNATAKA-576214 REPRESENTED BY ITS MANAGING DIRECTOR, SRI. K VENKATESH KINI

ALSO AT NO. 302/27, SHRISHTI RESIDENCY, RMV 2ND STAGE, JALADARASHINI LAYOUT, BANGALORE-560094.

…PETITIONER (BY SRI.S.S.NAGANAND., SENIOR ADVOCATE FOR SRI. NAGESH MORO.,ADVOCATE)

Digitally signed by VANAMALA N Location: HIGH COURT OF KARNATAKA HC-KAR AND:

1.

ADDITIONAL COMMISSIONER OF INCOME TAX RANGE-4(1) BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU-560095.

2.

INCOME TAX OFFICER, WARD 4(1)(3), BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU-560095.

…RESPONDENTS (BY SRI.M. DILIP., ADVOCATE A/W SRI. VINAYAKA S PANDIT., ADVOCATE)

THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ORDER DATED 19.06.2026 BEARING NO. ITBA/AST/F/148A/2026-27/1089931944(1) PASSED BY RESPONDENT NO. 2 (ANNEXURE C); II. QUASH THE PRIOR APPROVAL ORDER DATED 19.06.2026 BEARING NO. ITBA/AST/S/128/2026-27/1089930978(1) PASSED BY THE RESPONDENT NO. 1 (ANNEXURE C1); QUASH THE NOTICE DATED 19.06.2026 BEARING NO. ITBA/AST/S/148-1/2026-27/10899333810(1) PASSED BY RESPONDENT NO. 2 (ANNEXURE D); IV. DECLARE THAT THE ASSESSMENT OF PETITIONER FOR THE AY HC-KAR 2024-25 IS NOT A FIT CASE TO ISSUE NOTICE UNDER SECTION 148.

IN WP NO. 29627/2026

BETWEEN:

MODINNO INNOVATIONS INDIA PVT. LTD. A COMPANY REGISTERED UNDER THE COMPANIES ACT, 1956 HAVING ITS REGISTERED OFFICE AT NO. 9-83/M2, MODINNO INNOVATIONS PVT. LTD., CITY POINT COLLEGE ROAD, BYNDOOR, UDUPI, KARNATAKA-576214 REPRESENTED BY ITS MANAGING DIRECTOR, SRI. K VENKATESH KINI

ALSO AT NO. 302/27, SHRISHTI RESIDENCY, RMV 2ND STAGE, JALADARASHINI LAYOUT, BANGALORE-560094.

...PETITIONER

(BY SRI. S S NAGANAND., SENIOR ADVOCATE FOR SRI. NAGESH MORO.,ADVOCATE)

AND:

1.

ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-4(1) BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, HC-KAR KORAMANGALA, BENGALURU-560095.

2.

INCOME TAX OFFICER, WARD 4(1)(3), BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, NEAR KHB GAMES VILLAGE, KORAMANGALA, BENGALURU-560095.

...RESPONDENTS

(BY SRI.M. DILIP., ADVOCATE A/W SRI. VINAYAKA S PANDIT., ADVOCATE)

THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO I. QUASH THE ORDER DATED 19.06.2026 BEARING NO. ITBA/AST/F/148A/2026-27/1089934261(1) PASSED BY RESPONDENT NO. 2 (ANNEXURE C); II. QUASH THE PRIOR APPROVAL ORDER DATED 19.06.2026 BEARING NO. ITBA/AST/S/128/2026-27/1089933635(1) PASSED BY THE RESPONDENT NO. 1 (ANNEXURE C1); III. QUASH THE NOTICE DATED 19.06.2026 BEARING NO. ITBA/AST/S/148.1/2026-27/1089936696(1) PASSED BY RESPONDENT NO. 2 (ANNEXURE D).

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

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

ORAL ORDER

The petitioner [common in both these petitions] has called in question the following which relate to Assessment Years 2023-24 and 2024-25. The details of the impugned Order and the Notice in the petition in W.P.No.29486/2026 read as under:

Sl. No.

Notices/ Orders

Date Provisions of Income Tax Act, 1961

Annexures 1 Order 19.06.2026 148A(3) C 2 Prior Approval Order 19.06.2026 148A(3 and 151 C1 3 Notice 19.06.2026 148 D

The details of the impugned Order and the Notice in the petition in W.P.No.29627/2026 read as under:

Sl. No.

Notices/ Orders

Date Provisions of Income Tax Act, 1961

Annexures 1 Order 19.06.2026 148A(3) C 2 Prior Approval Order 19.06.2026 148A(3) and 151 C1 3 Notice 19.06.2026 148 D HC-KAR

2.

Sri S.S.Naganand, the learned Senior Counsel for the petitioner, submits that this Court must intervene because of the following reasons. [A] The petitioner is put on notice under Section 148A(1) of the Income Tax Act, 1961 [for short, ‘the IT Act’] to show cause against the alleged income chargeable to tax which has escaped assessment based on the bank credits and the difference as understood from the bank credits and the ITR filed. [B] The petitioner has responded to these notices stating that the bank credits cannot be taken as turnover because they also contain advances received by the petitioner. The petitioner has furnished the details of the entities who have given advances, their balance sheet and profit and loss HC-KAR report also stating that if further clarification is needed, the petitioner would produce the same. [C] The petitioner has not been called upon to furnish any further detail but the Adjudication Order under Section 148A(3) of the IT Act is in the premise that the petitioner’s response is not accepted because it has not submitted any confirmation from the respective parties, and this is despite the petitioner offering to furnish the further details and the documents if needed. [D] The show cause notice under Section 148A(1) of the IT Act issued on 29.03.2026 and the order under Section 148A(3) of the IT Act dated 19.06.2026 as is simultaneous notice HC-KAR under Section 148 of the IT Act, but the prior approval, which should be after the assessment of the fitness of the case, is even prior to the date of the notice.

3.

Sri M. Dilip, a learned standing counsel for the respondents, is heard on whether this Court must interfere on any of the grounds and if the Court must, then the terms thereof with Sri S. S. Naganand placing on record a copy of this Court’s order in W.P.No.28272/2026 [T-IT]1, stating that in similar circumstances this Court, even though the petitioner in such case argued on the deficiency in the prior approval, has only interfered with the order under Section 148A(3) of the IT Act restoring the proceedings for re-consideration with liberty to such petitioner to file further clarification that the second respondent may seek.

1 This petition is disposed of on 09.19.2026 HC-KAR

4.

This Court, even in these writ petitions because of the similarities in the circumstances, though there could be some amiss in how the prior approval has come about, is only inclined to set aside the proceedings as fitness of the cases for reassessment under Section 147 of the IT Act can be adjudged with opportunity to the petitioner to file confirmation from the persons and to furnish further details if required for assessment of the fitness of the case. As such, this Court interferes with the order under Section 148A(3) of the IT Act and the notice under Section 148 of the IT Act in the following terms. ORDER [A] The petitions are allowed – in – part.

[B] The following are quashed.

HC-KAR Sl. No.

Notices/ Orders

Date Provisions of Income Tax Act, 1961

Annexures 1 Order 19.06.2026 148A(3) C 2 Prior Approval Order 19.06.2026 148A(3) and 151 C1 3 Notice 19.06.2026 148 D

[C] The petitioner, without further notice, shall appear before the Income Tax Officer, Ward 1 and TPS, Udupi [the second respondent] on 30.10.2026 and the petitioner will be at liberty to file any further clarification that the second respondent may seek but the second respondent must consider the explanation offered in the light of this Court’s observation as afore.

Sd/- (B M SHYAM PRASAD) JUDGE SA Ct:sr

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