Facts of the Case

The present writ petition was filed challenging:

  • Order dated 25.07.2022 passed under Section 148A(d)
  • Notice dated 26.07.2022 issued under Section 148
  • Notice dated 21.05.2022 under Section 148A(b)

The dispute pertains to Assessment Year (AY) 2017–18.

A survey under Section 133A was conducted against Rockman Advertising and Marketing Limited and related entities, where the petitioner’s name appeared. Another survey was also conducted at the premises of certain individuals.

The survey indicated that:

  • The petitioner made cash deposits of ₹9,90,000 between 01.04.2016 and 08.11.2016
  • No deposits were made during the demonetization period

However, the Revenue alleged that:

  • The petitioner had credit entries of ₹83,58,82,035 in its bank account during FY 2016–17
  • The petitioner had declared only ₹36,100 as taxable income

Based on this, reassessment proceedings were initiated alleging escaped income.

Issues Involved

  1. Whether reassessment proceedings under Sections 148/148A can be initiated merely on suspicion without cogent material.
  2. Whether inconsistency between survey findings and allegations invalidates the reassessment proceedings.
  3. Whether the impugned order under Section 148A(d) was legally sustainable.

 Petitioner’s Arguments

  • The petitioner contended that the survey report did not support the allegations made in the reassessment proceedings.
  • It was argued that reassessment was initiated solely on suspicion, without any concrete evidence.
  • The mismatch between actual findings (limited cash deposits) and alleged huge bank credits showed non-application of mind.

 Respondent’s Arguments

  • The Revenue argued that:
    • There was a significant mismatch between declared income and bank credits.
    • This justified further inquiry.
  • Therefore, reassessment proceedings were validly initiated to investigate possible escaped income.

 Court Findings / Order

The Court held that:

  • The foundation of the reassessment order was mere suspicion, which is legally unsustainable.
  • Reassessment proceedings cannot be triggered without credible and tangible material.

Order:

  • The impugned order dated 25.07.2022 under Section 148A(d) was set aside.
  • Consequently, the notice under Section 148 automatically collapsed.
  • Liberty was granted to the Assessing Officer to conduct a fresh (de novo) exercise in accordance with law.

 Important Clarifications by Court

  • The Assessing Officer must:
    • Provide complete material and information to the assessee before initiating fresh proceedings.
    • Furnish bank statements and relied-upon documents.
    • Allow the petitioner to file a supplementary reply.
    • Grant personal hearing.
  • Reassessment must be based on substantive material, not suspicion.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/59017022023CW20192023_113352.pdf

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