Karnataka High Court Quashes Reassessment Over ₹13.39 Crore Turnover Without Supporting Computation

The Karnataka High Court on 7 October set aside an income tax reassessment order against Kunjalu Venkatesh Kini over alleged non-disclosure of business turnover of Rs. 13.39 crore, holding that the Income Tax Department must disclose the computation and supporting material before proceeding with reassessment.

Justice B.M. Shyam Prasad partly allowed Kini's petition and quashed the order passed under Section 148A(3) of the Income Tax Act, 1961, the related approval and the consequential reassessment notice. he held:

“...the second respondent ought to have put the petitioner on notice of these propositions with all the requisite details to substantiate such propositions. In the absence of the computation being made available for the sum of Rs.13,39,14,241/- and the details based on which the observations/propositions are put out in the impugned Order under Section 148A(3) of the IT Act, this Court opines that there would be more a roving enquiry in the reassessment than an enquiry on definite aspects..”

The case concerned assessment year 2021–22. On 27 March 2026, the Income Tax Department issued Kini a notice under Section 148A(1), asking him to explain why business turnover of Rs. 13,39,14,241 had not been disclosed in his income tax return.

In his response dated 22 April, Kini stated that the alleged discrepancy appeared to arise from a comparison of bank credits with reported turnover. He argued that bank credits could include entries that did not constitute business turnover and offered to provide further clarification if the Department specified the information required.

However, the subsequent order under Section 148A(3) raised additional allegations concerning Kini's partnerships with his wife in multiple firms, the alleged use of those firms to park funds and rotate profits, substantial expenses claimed without supporting documents, and unsecured loans involving minimal interest.

Kini argued that the Department had not raised these allegations in the original show-cause notice and had failed to provide the computation and supporting information behind the alleged turnover discrepancy. He contended that these omissions deprived him of a fair opportunity to respond.

The Revenue opposed quashing the entire proceedings, submitting that they had been initiated within the limitation period and that the Court could instead direct the authorities to address the deficiencies.

The Bench held that the reassessment authority must notify Kini of the specific grounds for reassessment and provide the material supporting those grounds. It also observed that the authority granting prior approval must examine the relevant material before approving proceedings under the Act.

Accordingly, the High Court remitted the matter for fresh consideration, directing the assessing authority to furnish the turnover computation and supporting material and give Kini a reasonable opportunity to respond.

For Petitioner: Senior Advocate S.S. Naganand, along with Advocate Nagesh Moro

For Respondent: Advocate M. Thirumalesh, assisted by Advocate Nirmal Mathew