Veena Arora v Commissioner of Income Tax 12 Delhi and Another- W P C No 22 of 2026-Decision dated 05 January 2026- High Court of Delhi

Core Issue:

Whether a reassessment notice issued under section 148 of the Income Tax Act 1961 after 01 April 2021 is valid when it is based on an excel sheet found during search proceedings at the premises of a third party real estate developer namely Bhutani Infra Group and Associates, and whether recording of traditional “reason to believe” is mandatory under the post 2021 reassessment regime.

Facts of the Case

1.         The Assessing Officer issued a notice dated 28 March 2025 under section 148 of the Income Tax Act proposing reassessment of the petitioner.

2.         The basis of the notice was an excel sheet recovered during search at the premises of Bhutani Infra Group and Associates, which allegedly reflected a cash transaction of Rs 7,97,991 in the name of the petitioner.

3.         The petitioner challenged the notice by way of a writ petition, contending that the excel sheet was a third party document,

(i)        there was no independent incriminating material linking the petitioner to the alleged cash transaction, and

(ii)       reassessment could not be initiated merely on the basis of such loose data without establishing nexus.

4.         During hearing, the petitioner admitted that she had purchased a flat from the said real estate group, but maintained that mere purchase of property cannot justify reopening of assessment.

Findings and Reasoning of the Court

1.         The High Court held that at the stage of issuance of notice under section 148, the Assessing Officer is only required to possess material which prima facie suggests escapement of income.

2.         The Court observed that after 01 April 2021, the statutory language of section 148 has undergone a fundamental change and does not require recording of “reason to believe” in the earlier strict sense.

3.         The existence of an excel sheet recovered during search, coupled with the admitted fact that the petitioner had financial dealings with the concerned builder, was held to be sufficient information to trigger reassessment proceedings.

4.         The Court emphasized that

(i)        adequacy, sufficiency, or correctness of the material relied upon by the Assessing Officer

(ii)       cannot be examined in writ jurisdiction.

5.         It was held that the petitioner’s remedy lies in demonstrating before the Assessing Officer that

(i)        the information is erroneous, or

(ii)       there is no nexus between the petitioner and the alleged cash transaction.

Outcome- The writ petition was dismissed.

(i)        The notice issued under section 148 was held to be valid and within jurisdiction.

(ii)       The Court clarified that observations made in the judgment shall not prejudice the merits of the reassessment proceedings.

(iii)      The petitioner was granted liberty to raise all factual and legal contentions before the Assessing Officer during reassessment.

 Statutory Framework for Reassessment After 01 April 2021

1.         Section 148:Enables issuance of notice for reassessment where income has escaped assessment.

 Post amendment, the section does not mandate recording of traditional “reason to believe” as was required earlier.

 2.         Section 148A:Introduced as a safeguard requiring

•          issuance of show cause notice,

•          opportunity of hearing, and

•          passing of a reasoned order before issuance of notice under section 148.

 3.         Shift in Legislative Intent:The reassessment regime has shifted from

•          subjective satisfaction based on “reason to believe”
•          to an information based trigger mechanism.

4.         Judicial Review at Notice Stage:Courts will examine only

•          existence of information, and
•          jurisdictional compliance.
•          Courts will not examine sufficiency or probative value of material at the notice stage.

Key Legal Principle Emerging:-

Under the post 01 April 2021 reassessment regime, existence of information suggesting escapement of income is sufficient for issuance of notice under section 148, even if such information originates from third party material such as documents or excel sheets found during search at a real estate developer. Recording of traditional “reason to believe” is no longer a condition precedent.

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