Facts of the Case

The present writ petition pertains to Assessment Year (AY) 2019–20, wherein the petitioner challenged the order dated 15.04.2023 passed under Section 148A(d) of the Income Tax Act, 1961 and the consequential notice dated 16.04.2023 issued under Section 148 of the Act.

The Assessing Officer (AO), based on information received from the Insight Portal, flagged the following transactions:

  • Time deposits amounting to Rs. 1,30,00,000/-
  • Statement of reportable account under Section 285BA(1) amounting to Rs. 2,79,87,633/-
  • TDS statement (payment to non-resident) amounting to Rs. 43,086/-

The cumulative value of these transactions was Rs. 4,10,30,719/-.

The petitioner, a resident of Canada, was present in India for only 31 days during the relevant AY. He had not filed a return of income, asserting that his income was below the taxable threshold.

The petitioner responded to the notice issued under Section 148A(b), explaining that:

  • Interest income from NRE accounts was exempt under Section 10(4).
  • NRO account interest was already subjected to TDS.
  • The time deposit of Rs. 1.30 crore was merely a reinvestment of maturity proceeds.
  • No such reportable transaction under Section 285BA(1) was undertaken, and no breakup was provided by the AO.

 Issues Involved

  1. Whether the order passed under Section 148A(d) without properly considering the petitioner’s reply is sustainable in law.
  2. Whether issuance of notice under Section 148 without furnishing complete details of alleged transactions violates principles of natural justice.
  3. Whether reassessment proceedings can be initiated without providing a breakup of transactions under Section 285BA(1).

 Petitioner’s Arguments

  • The petitioner contended that the transactions flagged were either exempt income or already explained.
  • Interest earned on NRE accounts was exempt under Section 10(4) of the Act.
  • The time deposit was not fresh income but reinvestment of earlier matured deposits.
  • The AO failed to provide detailed breakup of transactions amounting to Rs. 2,79,87,633/- under Section 285BA(1), thereby denying proper opportunity of response.
  • The impugned order was passed without due application of mind and in violation of statutory safeguards under Section 148A.

 Respondent’s Arguments

  • The Revenue relied upon information received from the Insight Portal indicating high-value transactions.
  • It was submitted that reassessment proceedings were validly initiated based on such information.
  • However, during the hearing, the Revenue fairly suggested that the matter may be remanded to the AO for reconsideration in light of the petitioner’s reply and material placed on record.

Court’s Findings / Order

The Delhi High Court observed that the Assessing Officer had not adequately considered the reply submitted by the petitioner.

  • The impugned order dated 15.04.2023 under Section 148A(d) and the consequential notice dated 16.04.2023 under Section 148 are set aside.
  • The matter is remanded to the AO for a de novo exercise.
  • The AO shall:
    • Provide a detailed breakup of the alleged transactions under Section 285BA(1).
    • Issue fresh notice.
    • Grant personal hearing to the petitioner.

The writ petition was accordingly disposed of.

 Important Clarification by Court

  • The AO must furnish complete details and breakup of high-value transactions before proceeding further.
  • Adequate opportunity of hearing must be provided to the assessee.
  • Mechanical passing of orders under Section 148A(d) without dealing with the assessee’s reply is not permissible.

Sections Involved

  • Section 148 – Income escaping assessment
  • Section 148A(b) – Opportunity of being heard
  • Section 148A(d) – Order for issuance of notice
  • Section 285BA(1) – Reporting of specified financial transactions
  • Section 10(4) – Exemption of income (NRE accounts)
  • Section 195 – TDS on payments to non-residents

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS18052023CW66722023_184807.pdf

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