Facts of the Case

The present writ petition was filed challenging the validity of:

  • Notice dated 17.03.2023 issued under Section 148A(b)
  • Order dated 31.03.2023 passed under Section 148A(d)
  • Consequential notice issued under Section 148 of the Income Tax Act, 1961

These proceedings pertained to Assessment Year 2016–17.

The Assessing Officer (AO) initiated reassessment proceedings on the premise that the petitioner had not filed his Income Tax Return (ITR). Based on information from the Insight Portal, the AO alleged income escaping assessment, including salary income, stock transactions, interest income, and sale of immovable property.

The petitioner sought time to respond due to health issues and personal circumstances, but the AO provided limited time and proceeded to pass the order without considering a detailed reply.

Issues Involved

  1. Whether reassessment proceedings can be initiated on an incorrect factual premise that the assessee is a non-filer.
  2. Whether the AO can rely on new material (email evidence) not disclosed in the notice under Section 148A(b).
  3. Whether adequate opportunity of being heard was provided to the assessee.
  4. Whether reassessment proceedings are valid when procedural safeguards under Section 148A are violated.

Petitioner’s Arguments

  • The petitioner had already filed the ITR, and therefore the very basis of issuing notice under Section 148A(b) was incorrect.
  • All relevant transactions, including salary and sale of property, were duly disclosed in the return, and intimation under Section 143(1) was received.
  • The alleged email from the purchaser, forming the basis of undisclosed income, was never supplied to the petitioner.
  • Insufficient time was granted to respond, violating principles of natural justice.

 Respondent’s Arguments

  • The Revenue relied upon the order passed under Section 148A(d) and justified reassessment proceedings.
  • It was argued that limitation was validly extended, and proceedings were within time.

Court’s Findings / Order

The Delhi High Court made the following key observations:

  • The initial notice under Section 148A(b) was based on an incorrect assumption that the petitioner had not filed his return.
  • The AO introduced new material (email evidence) in the order under Section 148A(d), which was not disclosed earlier, thereby violating procedural fairness.
  • The Court found ambiguity in the AO’s conclusion that the petitioner received “at least ₹1 crore”, observing that such vague expressions lack clarity and evidentiary basis.
  • Adequate opportunity was not properly granted to the petitioner.

Final Order:

  • The impugned notices and order were set aside.
  • Liberty was granted to the AO to initiate fresh proceedings in accordance with law.
  • The AO was directed to provide all relevant material, including the email, before proceeding further.

 Important Clarifications

  • Reassessment proceedings must strictly comply with procedural safeguards under Section 148A.
  • Any material relied upon by the AO must be disclosed at the stage of Section 148A(b).
  • Proceedings based on incorrect facts or assumptions are liable to be quashed.
  • Use of vague expressions like “at least” in determining undisclosed income is legally unsustainable.

 Sections Involved

  • Section 148A(b) – Inquiry before issuance of notice
  • Section 148A(d) – Order deciding whether it is a fit case for reassessment
  • Section 148 – Income escaping assessment
  • Section 143(1) – Intimation after return processing
  • Section 194IA – TDS on sale of immovable property
  • Section 192, 194A – TDS provisions

Link to download the order -  https://delhihighcourt.nic.in/app/showFileJudgment/59013042023CW46682023_105221.pdf

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