Once an Inquiry Under Section 148A(a) Is Approved, the Assessing Officer Cannot Skip It: Chhattisgarh High Court Quashes Reassessment

 

 

Landmark Judgment Reinforces That the Statutory Sequence Under Section 148A Is Mandatory and Cannot Be Bypassed

Ever since the reassessment provisions were overhauled by the Finance Act, 2021, one of the most litigated issues has been the mandatory procedure prescribed under Section 148A of the Income-tax Act. Courts across the country have repeatedly emphasized that the new reassessment regime was introduced to ensure greater procedural fairness before reopening completed assessments.

In a significant ruling, the Chhattisgarh High Court has now held that once the Assessing Officer obtains approval to conduct an inquiry under Section 148A(a), that inquiry cannot be skipped. Any attempt to directly issue a notice under Section 148A(b) without conducting the approved inquiry renders the entire reassessment proceedings invalid.

The decision in Satish Thourani v. Union of India & Others (WPT No. 79 of 2024, decided on 8 July 2026) is likely to become an important precedent for taxpayers challenging reassessment notices where the mandatory statutory procedure under Section 148A has not been followed.

Why This Judgment Is Important

The ruling is not confined to the facts of one case.

It lays down a broader jurisdictional principle:

When the Income-tax Act prescribes a sequence of mandatory procedural steps before reopening an assessment, every such step must be followed in the prescribed order.

The judgment reinforces that reassessment proceedings cannot be sustained merely because the Assessing Officer ultimately believes income has escaped assessment. The statutory safeguards themselves are part of the jurisdiction to reopen an assessment.

Understanding the Scheme of Section 148A

Section 148A was introduced to ensure that reassessment proceedings are initiated only after following a fair procedure.

Broadly, the provision contemplates:

1.  Inquiry under Section 148A(a), wherever the Assessing Officer considers it necessary and obtains prior approval;

2.  Notice under Section 148A(b) containing the information suggesting escapement of income;

3.  Consideration of the assessee’s reply;

4.  Order under Section 148A(d) deciding whether it is a fit case for issuing notice under Section 148;

5.  Notice under Section 148, if legally justified.

The sequence is intended to prevent arbitrary reopening of completed assessments.

Background of the Case

The Assessing Officer issued a notice under Section 148A(b) on 15 February 2024.

Interestingly, the notice itself disclosed that:

•  the Chief Commissioner of Income Tax, Raipur, had already granted approval on 14 February 2024 under Section 148A(a) for conducting an inquiry.

However, despite obtaining such approval, the Assessing Officer:

•  conducted no inquiry;

•  directly issued the notice under Section 148A(b);

•  thereafter passed an order under Section 148A(d); and

•  finally issued notice under Section 148.

The assessee challenged the entire reassessment proceedings before the High Court.

The Core Legal Issue

The question before the High Court was:

Can the Assessing Officer obtain approval for an inquiry under Section 148A(a), yet dispense with that inquiry and directly proceed under Section 148A(b)?

High Court’s Answer: Absolutely Not

The Chhattisgarh High Court answered the question in favour of the taxpayer.

The Court held that Section 148A prescribes a mandatory statutory sequence.

Once the Assessing Officer himself forms the opinion that an inquiry is necessary and secures the required approval, he becomes bound to conduct that inquiry.

He cannot subsequently ignore the very step for which approval was obtained.

Approval for Inquiry Is Not an Empty Formality

One of the most significant observations of the Court is that obtaining approval under Section 148A(a) is not a mere procedural ritual.

By seeking approval, the Assessing Officer himself acknowledges that:

•  further inquiry is necessary;

•  the available material requires verification;

•  the inquiry is an integral part of the decision-making process.

Having taken that position, the Assessing Officer cannot bypass the inquiry altogether.

Mandatory Procedure Cannot Be Short-Circuited

The Court emphasized that statutory safeguards cannot be treated as optional.

Where Parliament has prescribed a particular sequence, the authorities must follow that sequence faithfully.

Skipping an approved inquiry strikes at the very root of the jurisdiction to proceed further.

Consequently:

•  the notice under Section 148A(b);

•  the order under Section 148A(d); and

•  the notice under Section 148

all became legally unsustainable.

Revenue’s Preliminary Objection Rejected

The Revenue argued that the writ petition was premature because reassessment proceedings were still underway.

The High Court rejected this contention.

It observed that where the challenge concerns lack of jurisdiction arising from non-compliance with mandatory statutory procedure, the writ court is fully justified in examining the validity of the proceedings at the threshold.

The assessee need not wait for completion of an invalid reassessment.

Matter Remanded to the Assessing Officer

Rather than permanently terminating the proceedings, the Court adopted a balanced approach.

The High Court:

•  quashed the defective notices and order;

•  remanded the matter to the Assessing Officer;

•  directed that the inquiry under Section 148A(a) be conducted first;

•  permitted further proceedings only thereafter and strictly in accordance with law.

This ensures that while procedural safeguards are protected, the Revenue retains the opportunity to proceed lawfully.

Wider Implications of the Judgment

Although the dispute involved Section 148A(a), the ratio has much wider significance.

The judgment reinforces a broader principle applicable to reassessment proceedings:

•  jurisdiction depends upon strict compliance with statutory safeguards;

•  mandatory procedural requirements cannot be ignored for administrative convenience;

•  approvals obtained under the Act carry legal consequences;

•  procedural fairness forms part of the jurisdiction itself.

The ruling may assist taxpayers wherever the Revenue has failed to comply with the statutory sequence prescribed under the reassessment provisions.

Practical Guidance for Taxpayers

Whenever a notice under Section 148A is received, taxpayers should carefully verify:

•  whether any inquiry under Section 148A(a) was approved;

•  whether such inquiry was actually conducted;

•  whether the information supplied under Section 148A(b) is based upon the inquiry;

•  whether the statutory sequence has been properly followed.

These jurisdictional aspects often determine the validity of the entire reassessment.

Key Takeaways

•  Once approval under Section 148A(a) is obtained, the inquiry cannot be skipped.

•  Section 148A prescribes a mandatory statutory sequence.

•  The Assessing Officer cannot bypass the inquiry and directly issue notice under Section 148A(b).

•  Non-compliance with the statutory procedure invalidates the subsequent order under Section 148A(d) and notice under Section 148.

•  Writ jurisdiction can be invoked where reassessment proceedings suffer from jurisdictional defects.

Conclusion

The Chhattisgarh High Court’s decision in Satish Thourani v. Union of India is another important milestone in the evolving jurisprudence on the post-2021 reassessment regime.

The judgment makes it clear that the procedural safeguards introduced by Parliament are not empty formalities-they are mandatory jurisdictional requirements. Once the Assessing Officer chooses to invoke the inquiry mechanism under Section 148A(a) and secures statutory approval, that inquiry becomes an indispensable step in the reassessment process.

For taxpayers, the ruling offers significant protection against reassessment proceedings initiated in breach of the statutory framework. For tax administrators, it serves as a reminder that jurisdiction to reopen an assessment depends as much on following the prescribed procedure as on the existence of information suggesting escapement of income.

As litigation under the new reassessment regime continues to grow, this judgment is likely to become an important precedent on the mandatory nature of Section 148A procedures and the limits of the Assessing Officer’s powers.

The copy of the order is as under:

WPT No. 79 of 2024