Facts of the Case

The present writ petition was filed challenging the order dated 07.04.2023 passed under Section 148A(d) along with the consequential notice issued under Section 148 of the Income Tax Act for Assessment Year 2019–20.

The allegation against the petitioner was that it had entered into fictitious transactions amounting to ₹15.5 lakhs with BKR Capital Pvt. Ltd., which was allegedly an accommodation entry provider.

The petitioner responded to the notice under Section 148A(b), asserting that no such amount was taken and that the transaction reflected repayment through proper banking channels.

Despite acknowledging aspects of the petitioner’s explanation, the Assessing Officer proceeded to pass the impugned order assuming that the petitioner received equivalent cash in return, based on the modus operandi of accommodation entries.

Issues Involved

  1. Whether reassessment proceedings under Sections 148A(d) and 148 can be sustained without providing tangible material evidence to the assessee.
  2. Whether mere allegations based on general modus operandi of accommodation entries justify reopening of assessment.
  3. Whether failure to furnish relevant material violates principles of natural justice.

Petitioner’s Arguments

  • The Assessing Officer made assumptions without any concrete material establishing receipt of cash.
  • The transaction was conducted through banking channels and duly explained.
  • No evidence was provided to substantiate the allegation of accommodation entries.
  • The impugned order was arbitrary and based on conjectures rather than facts.

Respondent’s Arguments

  • The Revenue relied on information available on the insight portal indicating fictitious transactions.
  • Statements recorded under Section 132(4) suggested that BKR Capital Pvt. Ltd. was involved in providing accommodation entries.
  • It was contended that merely routing transactions through banking channels does not establish genuineness.
  • However, during hearing, the Revenue fairly suggested that the matter may be remanded for fresh consideration after furnishing relevant material.

Court Findings / Order

  • The Delhi High Court noted that the Assessing Officer proceeded on assumptions without furnishing supporting material to the petitioner.
  • The Court accepted the submission of the Revenue that the matter should be reconsidered.
  • Accordingly:
    • The impugned order under Section 148A(d) and notice under Section 148 were set aside.
    • Liberty was granted to the Assessing Officer to pass a fresh order.
    • The Assessing Officer was directed to first furnish relevant material to establish the allegation of cash receipt before proceeding further.

Important Clarification

  • Reassessment cannot be sustained merely on suspicion or generalized modus operandi of entry operators.
  • The Assessing Officer must provide specific and tangible material to the assessee before drawing adverse conclusions.
  • Compliance with principles of natural justice, especially disclosure of material, is mandatory in proceedings under Section 148A.

Sections Involved

  • Section 148A(d) of the Income Tax Act, 1961
  • Section 148 of the Income Tax Act, 1961
  • Section 148A(b) of the Income Tax Act, 1961
  • Section 132(4) of the Income Tax Act, 1961

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS25052023CW72972023_183239.pdf

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