Facts of the Case

The petitioner challenged three notices issued by the Income Tax Department concerning Assessment Year 2019–20:

  1. Notice dated 27.03.2023 under Section 148A(b)
  2. Notice dated 30.03.2023 under Section 148A(b) (subsequently withdrawing the earlier notice)
  3. Notice dated 31.03.2023 under Section 148

The allegation against the petitioner was that it had entered into a transaction of ₹50 lakhs with Lenient Consultant Pvt. Ltd., allegedly controlled by an entry provider.

Subsequently, the Revenue abandoned proceedings under Section 148A and directly issued a notice under Section 148, citing a search conducted under Section 132 in relation to another person.

Issues Involved

  1. Whether reassessment proceedings under Section 148 can be initiated after withdrawing proceedings under Section 148A without proper justification.
  2. Whether a notice under Section 148 is valid when it is vague and does not specify the person searched or nexus with the assessee.
  3. Whether the Revenue can rely on a search conducted on a third party without clearly linking it to the assessee.

Petitioner’s Arguments

  • The Revenue arbitrarily shifted from Section 148A proceedings to Section 148 without justification.
  • The petitioner was not subjected to any search under Section 132.
  • The petitioner had no knowledge of any search conducted on any alleged connected person.
  • The notice issued under Section 148 was vague and lacked material particulars, especially regarding the identity of the person searched.
  • The procedural safeguards under Section 148A were bypassed unlawfully.

Respondent’s Arguments

  • The Assessing Officer acted correctly in invoking Section 148 directly due to the applicability of search-related provisions.
  • Since the search was conducted after 01.04.2021, reassessment proceedings could be initiated under Section 148.
  • The Revenue relied on material indicating that a search was conducted on persons connected to the petitioner.

Court’s Findings

  • The Court noted that the first notice under Section 148A(b) along with its annexure stood withdrawn through the second notice.
  • The third notice under Section 148 merely stated that a search was conducted but failed to specify the person searched.
  • The Court held that the notice was vague and lacked clarity, which is a fundamental defect.
  • There was no clear nexus established between the petitioner and the alleged search.
  • The procedural transition from Section 148A to Section 148 was not properly justified.

Court Order / Final Decision

  • The Delhi High Court allowed the writ petition.
  • All impugned notices dated 27.03.2023, 30.03.2023, and 31.03.2023 were quashed.
  • Liberty was granted to the Assessing Officer to take steps in accordance with law, if required.

Important Clarification

  • A reassessment notice under Section 148 must clearly disclose the basis, especially when triggered by a search under Section 132.
  • Vague notices without identifying the searched person or linkage to the assessee are invalid.
  • Withdrawal of Section 148A proceedings followed by direct invocation of Section 148 must be legally justified and procedurally sound.

Sections Involved

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

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS19052023CW67512023_190948.pdf

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