Facts of the Case

The petitioner challenged an order dated 21.10.2022 passed under Section 148A(d) of the Income Tax Act, 1961, along with a notice of even date issued under Section 148 of the Act for Assessment Year 2015-16. The reassessment proceedings were initiated pursuant to information received by the Assessing Officer following search and investigation actions involving Tradenext Securities Ltd. and the Kundu Group.

 Issues Involved

  1. Whether the information available with the Assessing Officer was suggestive of the petitioner’s income escaping assessment.
  2. Whether initiation of reassessment proceedings under Sections 148A and 148 was valid in law.
  3. Whether alleged off-market share transactions could form the basis for reopening assessment.
  4. Whether the order passed under Section 148A(d) suffered from any legal infirmity.

 Petitioner’s Arguments

  • The information relied upon by the Assessing Officer did not relate to the petitioner.
  • The petitioner had no connection with Tradenext Securities Ltd. or the Kundu Group.
  • The petitioner had not claimed exemption under Section 10(38) of the Act in respect of the shares in question.
  • The shares of Aurobindo Pharma Ltd. were claimed to have been purchased in the normal course of trading through an existing broker account.

 Respondent’s Arguments

  • Information received from the investigation wing revealed a modus operandi involving accommodation entries through off-market share transactions.
  • The petitioner had purchased 4,800 shares of Aurobindo Pharma Ltd. worth ₹56,04,000/- through an off-market transaction.
  • The investment was not commensurate with the income disclosed by the petitioner in the relevant assessment years.
  • The information was sufficient to form a prima facie belief that income had escaped assessment.

 Court Order / Findings

  • The Court noted that the petitioner admitted that the purchase of 4,800 shares of Aurobindo Pharma Ltd. was an off-market transaction and not through a recognised stock exchange.
  • The petitioner failed to provide material particulars such as purchase price, source of funds, and dates of acquisition and transfer.
  • The investigation report clearly identified the petitioner’s transaction as part of the accommodation entry structure.
  • At the stage of issuance of notice under Section 148, the Court held that it is sufficient if there is information suggestive of income escaping assessment.

 Important Clarification

The Court clarified that at the stage of reassessment initiation, it is not required to conclusively determine tax liability. The only requirement is the existence of credible information suggesting escapement of income, which was satisfied in the present case.

 Final Outcome

The writ petition was dismissed as unmerited. The Delhi High Court upheld the validity of the order passed under Section 148A(d) and the notice issued under Section 148 of the Income Tax Act, 1961, thereby allowing the reassessment proceedings to continue in accordance with law.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770114349_SMT.ANUGUPTAVsINCOMETAXOFFICERWARD541DELHI.pdf 

 

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