Facts of the Case

The present writ petition pertains to Assessment Year 2018–19 wherein reassessment proceedings culminated in an assessment order dated 17.03.2023 passed under Sections 147 read with 144B of the Income Tax Act.

The allegation against the petitioner was that it had received accommodation entries in the form of unsecured loans through dummy entities allegedly controlled by one Aditya Jain. One such entity involved was Odisha Finlease Private Limited (OFPL), claimed to be a non-banking financial company.

The petitioner admitted receipt of loan amounting to ₹65 lakhs in Financial Year 2015–16 and stated that during the relevant Assessment Year 2018–19, only interest of ₹1,69,509/- was paid. It was also asserted that the loan had been repaid through proper banking channels.

The Assessing Officer allegedly initiated reassessment proceedings based on Form 16A data relating to TDS, by multiplying the interest amount to infer escaped income. The petitioner also contended that despite requesting a personal hearing, the same was not granted.

 Issues Involved

  1. Whether reassessment proceedings under Section 147 read with Section 144B are valid when no personal hearing is granted despite request.
  2. Whether denial of opportunity of hearing violates principles of natural justice in faceless assessment proceedings.
  3. Whether the assessment order passed without granting personal hearing is liable to be set aside.

 Petitioner’s Arguments

  • The petitioner contended that the loan transaction was genuine and duly routed through banking channels.
  • It was argued that the reassessment was triggered merely on the basis of Form 16A data without proper application of mind.
  • The petitioner emphasized that only interest income was reflected in the relevant year, not the principal loan amount.
  • A crucial contention was that despite a specific request, no personal hearing was granted, which is a violation of procedural fairness.

 Respondent’s Arguments

  • The Revenue alleged that the petitioner was a beneficiary of accommodation entries through dummy entities.
  • It was submitted that such entries were routed through entities like OFPL in lieu of commission.
  • However, upon instructions, the Revenue fairly conceded before the Court that no personal hearing was granted by the Assessing Officer.

 Court’s Findings / Order

The Delhi High Court observed that admittedly no personal hearing was granted to the petitioner.

In view of this procedural lapse, the Court held that the assessment order cannot be sustained and accordingly:

  • Set aside the assessment order dated 17.03.2023
  • Granted liberty to the Assessing Officer to take fresh steps in accordance with law
  • Disposed of the writ petition

 Important Clarification

  • The Court did not adjudicate on the merits of the reassessment or alleged accommodation entries.
  • The decision is strictly based on violation of principles of natural justice, particularly denial of personal hearing.
  • The Assessing Officer retains the right to proceed afresh as per law after complying with due process.

 Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/RAS31052023CW57382023_151231.pdf

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