Facts of the Case

The petitioner, Zoom Insurance Brokers Pvt. Ltd., challenged notices dated 24.03.2025 and 28.05.2025 issued under Section 148A(1) of the Income-tax Act, 1961, the order dated 23.06.2025 passed under Section 148A(3), and the consequent notice dated 23.06.2025 issued under Section 148 for Assessment Year 2019–20. The reassessment proceedings were initiated on the basis of information received through the Risk Management Strategy formulated by the CBDT, pursuant to a search and seizure operation conducted on 30.11.2022 on Middle Layer Business Entities in the insurance sector. The investigation alleged that certain entities acted as pass-through intermediaries for routing additional insurance commission in excess of IRDAI limits. The petitioner was identified as having transactions amounting to ₹82,25,822 with IFFCO Tokio General Insurance Company Ltd.

Issues Involved

Whether reassessment proceedings could be quashed at the Section 148A stage when the assessee asserted that the disputed commission income was already disclosed and taxed, whether the Assessing Officer had sufficient material to form a prima facie belief that income had escaped assessment, and whether the High Court should interfere at the threshold stage of reopening.

Petitioner’s Arguments

The petitioner contended that the amount of ₹82,25,822 represented legitimate brokerage income received from IFFCO Tokio General Insurance Company Ltd., duly disclosed in its audited accounts and return of income, and that tax had already been paid thereon. It was argued that detailed reconciliations, invoices, and insurer confirmations were furnished in response to the notice under Section 148A(1). The petitioner further submitted that there was no material to suggest escapement of income exceeding ₹50 lakhs and that reopening was based on mere suspicion. Reliance was placed on the judgment of the Delhi High Court in Jindal Saw Limited to contend that reassessment cannot proceed where the explanation already stands accepted on record.

Respondent’s Arguments

The Revenue submitted that the reassessment was initiated on the basis of credible information emerging from a large-scale investigation into Middle Layer Business Entities acting as conduits for routing excessive insurance commissions. It was argued that the petitioner’s reply was vague and did not adequately address the core issue regarding the percentage of commission vis-à-vis premium receipts and IRDAI norms. The Revenue contended that at the Section 148A stage, only a prima facie view is required and disputed questions of fact must be examined during reassessment proceedings.

Court Order / Findings

The Delhi High Court held that at the stage of Section 148A, the Assessing Officer is only required to form a prima facie opinion based on material indicating possible escapement of income. The Court observed that the reassessment proceedings were initiated pursuant to information obtained through the Risk Management Strategy and investigation into alleged bogus insurance commission routing, which constituted recognised “information” under the Act. The Court found that the petitioner had been afforded an opportunity to respond and that there was no violation of principles of natural justice. Relying on its earlier decisions including R.S. Alloys and Majestic Handicraft Pvt. Ltd., the Court reiterated that sufficiency of evidence cannot be examined in writ jurisdiction at the reopening stage and that the Assessing Officer is entitled to verify whether the impugned transactions were genuine or spurious during reassessment.

Important Clarification

The Court clarified that all contentions raised by the petitioner regarding genuineness of brokerage income, compliance with IRDAI norms, and prior disclosure in returns remain open to be urged before the Assessing Officer during reassessment proceedings. The High Court’s refusal to interfere does not amount to any final determination on merits.

Final Outcome

The writ petition was dismissed. The notices issued under Sections 148A(1) and 148, and the order passed under Section 148A(3) for Assessment Year 2019–20 were upheld. The reassessment proceedings were permitted to continue in accordance with law, and the accompanying application for stay was also dismissed.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769680711_ZOOMINSURANCEBROKERSPVT.LTDVsASSISTANTCOMMISSIONEROFINCOMETAXCIRCLE251.pdf

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