Facts of the Case

The petitioner challenged an order dated 12 April 2024 passed under Section 148A(d) of the Income-tax Act, 1961 for Assessment Year 2020-21, pursuant to which a notice under Section 148 was issued.

The reassessment proceedings were initiated on the basis of information received from the Investigation Wing indicating that the petitioner had allegedly made bogus purchases from two entities, namely M/s S.P. Trading and M/s N.B. Agency, amounting to ₹1,09,50,285/- during the relevant financial year. The said entities were allegedly found to be non-existent at their registered addresses.

The petitioner responded to the show cause notice under Section 148A(b) by submitting invoices, e-way bills, lorry receipts, and bank statements to substantiate the genuineness of the purchases.

 

Issues Involved

Whether the Assessing Officer had sufficient material to form a prima facie belief that income had escaped assessment.

Whether reassessment proceedings could be initiated where purchases were allegedly made from non-existent entities.

Whether the petitioner’s documentary explanation was sufficient to bar issuance of notice under Section 148.

Scope of judicial interference at the stage of Section 148A(d).

 

Petitioner’s Arguments

The petitioner contended that all purchases were genuine and duly supported by invoices, transportation documents, and banking channels. It was argued that the Assessing Officer failed to appreciate the material placed on record and mechanically proceeded to issue notice under Section 148.

It was further submitted that reassessment proceedings were unwarranted and amounted to harassment, as no conclusive material existed to show escapement of income.

 

Respondent’s Arguments

The Revenue argued that information received from the Investigation Wing clearly indicated that the suppliers were non-existent and were paper entities engaged in providing accommodation entries.

It was submitted that at the stage of reopening, the Assessing Officer is only required to form a prima facie view based on tangible material and not to conclusively establish escapement of income.

 

Court Order / Findings

The Delhi High Court dismissed the writ petition and upheld the reassessment proceedings. The Court held that:

At the stage of issuing notice under Section 148, the Assessing Officer is not required to finally adjudicate the issue.

Information indicating that suppliers were non-existent provides sufficient basis to form a belief that income chargeable to tax has escaped assessment.

Documentary evidence such as invoices and e-way bills, without proof of creditworthiness or physical existence of suppliers, does not preclude reassessment.

Judicial interference at the Section 148A stage is limited.

The Court relied upon the principles laid down by the Supreme Court in ACIT v. Rajesh Jhaveri Stock Brokers Pvt. Ltd. to reiterate the limited scope of scrutiny at the reopening stage.

 

Important Clarification

The Court clarified that:

Observations in the judgment are confined solely to examining the validity of the reassessment initiation.

The Assessing Officer is required to independently examine the merits of the case during reassessment proceedings.

No final opinion has been expressed on the taxability of the alleged purchases.

This decision reinforces that reassessment proceedings are legally sustainable where credible information suggests possible escapement of income, even though final determination is yet to be made.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770202516_RAGHAVGARGVsINCOMETAXOFFICERWARD351DELHI.pdf  

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.