Facts of the Case

The present writ petition pertains to Assessment Year (AY) 2019–20, wherein the petitioners were subjected to reassessment proceedings initiated under Section 148A(b) of the Income Tax Act.

The Revenue alleged that the petitioners were beneficiaries of accommodation entries provided by one Ankit Jain (Proprietor of Rishabh Trading Company) amounting to ₹1,15,10,016.

The petitioners:

  • Filed replies dated 31.03.2023 and 05.04.2023
  • Asserted that:
    • Purchases worth ₹70,10,016 were genuine
    • Sales worth ₹45 lakhs were also legitimate
  • Denied allegations of bogus transactions

Despite these submissions, the Assessing Officer (AO) proceeded with reassessment and passed an order under Section 148A(d).

 Issues Involved

  1. Whether reassessment proceedings can be initiated without tangible material linking the assessee to alleged accommodation entries
  2. Whether non-supply of approval for reassessment proceedings vitiates the proceedings
  3. Whether reliance on a third-party statement without specific reference to the assessee is valid

 Petitioner’s Arguments

  • No material existed to justify initiation of reassessment proceedings
  • The statement of Ankit Jain (dated 07.11.2019):
    • Did not mention the petitioners
  • An affidavit by Ankit Jain confirmed:
    • Transactions with petitioners were genuine
  • Petitioners even offered:
    • Production of Ankit Jain for examination
  • Mandatory approval for reassessment:
    • Not provided to petitioners

 Respondent’s Arguments

  • The AO had relevant material to initiate reassessment
  • Relied on:
    • Statement of Ankit Jain (particularly response to Question 18)
  • Claimed:
    • Evidence indicated possible unaccounted cash transactions

 Court’s Findings / Order

The Court observed:

  • The only material relied upon was:
    • A statement admitting out-of-book cash transactions of ₹16,29,423
  • Crucially:
    • No reference to the petitioners was found in the statement
  • Revenue failed to:
    • Produce any material linking petitioners to alleged accommodation entries
  • Approval for reassessment:
    • Not furnished to petitioners

Final Order

  • Impugned notice under Section 148A(b) and order under Section 148A(d) set aside
  • Liberty granted to AO:
    • To reinitiate proceedings in accordance with law

Important Clarifications

  • Mere general admission of wrongdoing by a third party is insufficient
  • There must be:
    • Specific nexus between assessee and alleged transactions
  • Procedural compliance (like approval disclosure):
    • Is mandatory in reassessment proceeding

Sections Involved

  • Section 148A(b) – Notice before reassessment
  • Section 148A(d) – Order after considering reply
  • Income Tax Act, 1961
    • Need for tangible material
    • Protection against mechanical reopening of assessments

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/60827092023CW128132023_165140.pdf

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