AO is under an obligation to assign reasons for rejecting explanation of the assessee

AO is under an obligation to duly consider the explanation furnished by the assessee and assign reasons for rejecting the same – High Court

In a recent judgment, Hon’ble High Court has held that Assessing Officer (AO) is under an obligation to duly consider the explanation furnished by the assessee and assign reasons for rejecting the same, merely stating that explanation is not satisfactory not sufficient.

ABCAUS Case Law Citation:
5204 (2026) (08) abacus.in HC

In the instant case, the Petitioner /assessee had filed a Writ Petition praying for quashing the impugned show cause notice issued under section 148A(1) and order under section 148A(3) issued by the AO.

The Hon’ble High Court observed that the impugned order had been passed without due consideration of the reply submitted by the petitioner. A bare perusal of the impugned order revealed that the income tax authority had merely observed that the petitioner’s explanation was not satisfactory and requires no further examination, without assigning any cogent reasons in support thereof.

Their Lordships opined that the authority was under an obligation to duly consider the explanation furnished by the petitioner and assign reasons for rejecting the same. Since this exercise had not been undertaken, the impugned orders could not be sustained in law and are liable to be quashed.

Consequently, the Hon’ble High Court quashed and set aside the impugned orders and the matter was remitted to the authority concerned to reconsider the reply submitted by the petitioner and thereafter pass a reasoned and speaking order in accordance with law after affording the petitioner an adequate opportunity of hearing.

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