Facts of the Case

  • The petitioner was issued notice dated 19.05.2022 under Section 148A(b) alleging sale of immovable property worth ₹8 crores with undisclosed capital gains.
  • The petitioner responded stating that no sale had taken place; rather, it had purchased the property.
  • Details of purchase consideration, TDS deduction (1%), and Form 26QB/26AS were provided.
  • Earlier, notice under Section 133(6) was issued and duly responded to by the petitioner.
  • Despite this, AO passed order under Section 148A(d) holding that income of ₹8.48 crores had escaped assessment.
  • AO alleged non-disclosure of asset, absence of Form 26QB, and unexplained source of funds.

 Issues Involved

  1. Whether reassessment proceedings under Section 148A can be sustained when based on incorrect foundational facts.
  2. Whether failure to consider material evidence amounts to non-application of mind by the AO.
  3. Whether an order under Section 148A(d) inconsistent with the notice under Section 148A(b) is legally valid.

 Petitioner’s Arguments

  • The property was purchased, not sold, and thus no capital gains arose.
  • The transaction was duly disclosed in the balance sheet.
  • Bank account details and financial trail were provided.
  • The purchase was funded through own funds and bank loan (₹6.75 crores).
  • AO ignored material evidence and passed the order mechanically.

 

Respondent’s Arguments

  • The AO relied on available records indicating discrepancies.
  • It was contended that reassessment was justified due to lack of proper disclosure.
  • However, during hearing, Revenue fairly submitted that the matter may be reconsidered by the AO.

 Court Findings / Judgment

  • The Court held that there was clear non-application of mind by the AO.
  • The AO failed to consider material documents such as balance sheet, bank details, and loan records.
  • The foundation of the notice itself was incorrect, as it assumed a sale instead of purchase.
  • The order under Section 148A(d) was not aligned with the notice under Section 148A(b).
  • Such inconsistency renders the reassessment proceedings unsustainable.

 Court Order

  • The impugned order dated 28.07.2022 under Section 148A(d) and consequential notice were set aside.
  • AO may initiate fresh proceedings only from the stage prior to issuance of notice under Section 148A(b) if deemed necessary.
  • Writ petition disposed of accordingly.

 Important Clarification by Court

  • Reassessment must be based on correct foundational facts.
  • Authorities must apply independent mind and consider all material evidence.
  • Proceedings cannot be sustained where there is fundamental factual error.
  • AO cannot shift grounds mid-way without proper basis.

Sections Involved

  • Section 148A(b) – Inquiry before issuance of notice
  • Section 148A(d) – Order for reassessment
  • Section 133(6) – Power to call for information
  • Income Tax Act, 1961

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS25052023CW72662023_183008.pdf

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