Facts of the Case

The present writ petition pertains to Assessment Year 2019–20. The petitioner, Dhiru Realestates Private Limited, challenged the validity of proceedings initiated under Section 148A of the Income Tax Act, 1961.

A notice dated 29.03.2023 under Section 148A(b) alleged that the petitioner had unexplained and undisclosed credit entries amounting to ₹7,26,63,153/- in its bank account.

In response, the petitioner submitted that the information relied upon by the Revenue was incorrect and that the actual credits in the bank account were only ₹99,67,272/-.

The Assessing Officer (AO), while passing an order under Section 148A(d) dated 08.04.2023, accepted that the petitioner’s contention regarding the incorrect figure was valid. However, the AO proceeded to raise new allegations regarding unexplained transactions and cash deposits which were not part of the original notice under Section 148A(b).

 Issues Involved

  1. Whether the Assessing Officer can introduce new grounds and allegations in an order passed under Section 148A(d) which were not part of the initial notice under Section 148A(b).
  2. Whether such action violates principles of natural justice.
  3. Whether reassessment proceedings can be sustained when the foundational notice itself is defective or incomplete.

Petitioner’s Arguments

  • The petitioner contended that the initial notice under Section 148A(b) was based on incorrect factual information.
  • It was argued that once the AO accepted that the alleged amount of ₹7.26 crore was incorrect, the very basis of the proceedings ceased to exist.
  • The petitioner further argued that the AO introduced new allegations in the order under Section 148A(d), including unexplained credits and cash deposits, which were never put to the petitioner for response.
  • This amounted to a violation of the principles of natural justice as no opportunity was given to address these new allegations.

Respondent’s Arguments

  • The Revenue relied on the material available on record and supported the order passed under Section 148A(d).
  • It was contended that despite correction of the figures, the petitioner failed to explain certain credit entries and cash deposits.
  • The Revenue justified the reassessment on the ground that income chargeable to tax had escaped assessment.

Court’s Findings / Order

The Delhi High Court observed:

  • The Assessing Officer acknowledged that the original allegation in the notice under Section 148A(b) was incorrect.
  • Despite this, the AO proceeded to make fresh allegations in the order under Section 148A(d), which were not part of the original notice.
  • Such action deprived the petitioner of an opportunity to respond to these new allegations.

The Court held that:

  • The issues forming the basis of the order under Section 148A(d) were not put to the petitioner.
  • This constituted a clear violation of principles of natural justice.

Accordingly, the Court set aside the impugned order and notices, while granting liberty to the Assessing Officer to proceed afresh in accordance with law.

 Important Clarification

  • The Court did not adjudicate on the merits of the alleged escaped income.
  • The decision was confined to procedural legality, particularly adherence to principles of natural justice.
  • The Revenue retains the liberty to initiate fresh proceedings, provided due process is followed.

Sections Involved

  • Section 148A(b), Income Tax Act, 1961 – Show cause notice before reassessment
  • Section 148A(d), Income Tax Act, 1961 – Order deciding whether it is a fit case for reassessment
  • Principles of Natural Justice (Audi Alteram Partem)

 Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/60801062023CW80132023_142559.pdf

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