Facts of the Case

The present writ petition was filed challenging the order dated 28.07.2022 passed under Section 148A(d) of the Income Tax Act, 1961 along with the consequential notice issued under Section 148 for Assessment Year 2015–16.

The Revenue alleged that income amounting to ₹1,71,53,467/- had escaped assessment. The petitioner was accused of:

  • Providing accommodation entries to Mittersain Rajesh Kumar (Proprietor: Mr. Hitesh Jain), and
  • Being a beneficiary of accommodation entries allegedly provided by Mr. Ramesh Kumar Bagri.

The petitioner submitted replies and also relied on a bank certificate issued by Central Bank of India to demonstrate that no transaction had been entered into with Mr. Ramesh Kumar Bagri during the relevant financial year.

Issues Involved

  1. Whether reassessment proceedings under Section 148 and order under Section 148A(d) are valid when the alleged escaped income falls below the statutory threshold.
  2. Whether reassessment can be sustained when the foundational allegation itself is incorrect or does not pertain to the assessee.
  3. Whether proceedings under Section 148 can be initiated without proper factual verification.

Petitioner’s Arguments

  • The petitioner contended that no transactions were undertaken with Mr. Ramesh Kumar Bagri during the relevant period, supported by a bank certificate.
  • It was further argued that no transactions existed with Mittersain Rajesh Kumar as alleged.
  • The reassessment proceedings were initiated mechanically without proper application of mind.
  • The statutory threshold for reopening was not satisfied.

Respondent’s Arguments

  • The Revenue initially alleged accommodation entries involving both parties.
  • However, during proceedings, it was conceded:
    • The allegation concerning Mr. Ramesh Kumar Bagri did not relate to the petitioner.
    • The alleged accommodation entry involving Mittersain Rajesh Kumar amounted only to ₹28,90,383/-, which is below ₹50,00,000.

Court’s Findings / Order

The Delhi High Court made the following key observations:

  • The allegation regarding Mr. Ramesh Kumar Bagri was factually incorrect and did not concern the petitioner.
  • The remaining alleged amount of ₹28,90,383/- was below ₹50 lakhs, and hence reassessment proceedings could not be triggered.
  • Since the foundational requirements for reopening were not met, the proceedings were invalid.

Final Order:

  • The impugned order under Section 148A(d) dated 28.07.2022 was set aside.
  • The notice issued under Section 148 also stood quashed.
  • The writ petition was allowed.

 Important Clarification by Court

  • Reassessment proceedings cannot be initiated where the escaped income is below ₹50 lakhs, as per statutory framework.
  • Incorrect or unrelated allegations cannot form the basis of reopening.
  • Proper application of mind and factual verification is mandatory before invoking Section 148.

 Sections Involved

  • Section 148 – Income escaping assessment
  • Section 148A(b) – Show cause notice
  • Section 148A(d) – Order for reassessment
  • Income Tax Act, 1961

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/RAS27042023CW174632022_152923.pdf

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