Facts of the Case

  • The case pertains to Assessment Year 2018–19.
  • The petitioner challenged:
    • Reassessment order dated 18.03.2023 under Sections 147/144B
    • Demand notice under Section 156
    • Penalty notice under Section 274 r/w Section 271AAC(1)
    • Notice under Section 148A(b), order under Section 148A(d), and notice under Section 148
  • The Revenue alleged that the petitioner entered into a transaction of unsecured loan with a dummy entity, namely Odisha Finlease Pvt. Ltd., amounting to ₹1.48 crore.
  • The petitioner contended:
    • No loan was taken during AY 2018–19
    • Loan was actually taken in preceding AY (2017–18) and later repaid
  • Bank statements showed:
    • Receipt of ₹2.5 crore in FY 2016–17
    • Repayment of ₹2 crore + interest ₹13,80,822 in FY 2017–18
  • TDS was deducted on interest payments.

 Issues Involved

  1. Whether reassessment proceedings were valid despite alleged factual inconsistencies.
  2. Whether denial of personal hearing under faceless assessment violates principles of natural justice.
  3. Whether non-consideration of reply renders reassessment order invalid.

 Petitioner’s Arguments

  • The transaction was genuine and duly supported by bank records.
  • Loan was taken in an earlier year and already repaid.
  • TDS certificates substantiated the interest payments.
  • Detailed reply to show cause notice was filed but not considered by the Assessing Officer.
  • Request for personal hearing via video conferencing was denied, violating procedural fairness.

 Respondent’s Arguments

  • The Revenue alleged that the transaction involved a dummy entity and represented unexplained income.
  • However, during proceedings, the Revenue conceded that principles of natural justice were breached.

 Court’s Findings / Order

  • The Court noted a clear violation of principles of natural justice, particularly:
    • Failure to grant personal hearing
    • Non-consideration of petitioner’s response
  • Without examining merits, the Court:
    • Set aside the impugned reassessment order and notices
    • Granted liberty to the Assessing Officer to conduct de novo proceedings
  • Directions issued:
    • Proper notice must be given
    • Opportunity of hearing must be provided
    • A reasoned (speaking) order must be passed

 Important Clarification by Court

  • Even under faceless assessment regime (Section 144B), adherence to natural justice is mandatory.
  • If requested, personal hearing must be granted, especially where adverse consequences follow.
  • Authorities must deal with all submissions made by the assessee before passing orders.

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/RAS27042023CW44442023_193613.pdf

 

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