Facts of the Case

The present writ petition was filed challenging the order dated 10.04.2022 passed under Section 148A(d) of the Income Tax Act, 1961 and the consequential notice dated 11.04.2022 issued under Section 148 for Assessment Year 2018–19.

The allegation against the petitioner was that he was a beneficiary of fictitious purchases amounting to ₹25,24,728 from an entity named Balaji Enterprises. However, the annexure to the notice issued under Section 148A(b) failed to specify the exact nature of such fictitious transactions.

Additionally, the petitioner sought copies of approvals under Section 151 and the material forming the basis of reassessment proceedings.

 Issues Involved

  1. Whether the reassessment order under Section 148A(d) is valid when the Assessing Officer fails to consider the reply filed by the assessee.
  2. Whether reassessment proceedings can be sustained when material linking the assessee to alleged fictitious transactions is not disclosed.
  3. Whether non-application of mind by the Assessing Officer vitiates the reassessment proceedings.

 Petitioner’s Arguments

  • The petitioner contended that he had duly filed a reply dated 28.03.2022 within the prescribed time.
  • It was argued that purchases from Balaji Enterprises were already accounted for, and taxes were paid under the presumptive taxation scheme (Section 44AD).
  • Therefore, even if purchases were assumed to be fictitious, there would be no tax impact.
  • The petitioner further argued that the Assessing Officer failed to provide relevant material and approvals, thereby violating principles of natural justice.

 Respondent’s Arguments

  • The Revenue maintained that reassessment proceedings were validly initiated based on information indicating fictitious purchases.
  • It relied upon the statutory framework under Sections 148 and 148A for reopening assessment.

 Court’s Findings / Order

  • The Delhi High Court observed that the Assessing Officer failed to consider the petitioner’s reply, including the crucial contention regarding taxation under Section 44AD.
  • The Court noted lack of clarity and inconsistency in the allegation, especially where the notice referred to fictitious purchases but also mentioned absence of capital gains.
  • It was held that non-consideration of submissions and lack of reasoning renders the order unsustainable.

Order:

  • The impugned order under Section 148A(d) was set aside.
  • The matter was remanded for fresh consideration (de novo exercise).

 Important Clarifications by Court

  • The Assessing Officer must provide all material/information linking the petitioner to alleged fictitious purchases before proceeding further.
  • The petitioner must be granted:
    • Opportunity to file a supplementary reply,
    • Personal hearing, and
    • Copy of the final order.
  • The Court clarified that it has not examined the merits, and fresh proceedings must be conducted independently.

Sections Involved

  • Section 148 – Income escaping assessment
  • Section 148A – Procedure before issuing notice under Section 148
  • Section 148A(b) – Opportunity of being heard
  • Section 148A(d) – Order for reassessment
  • Section 151 – Sanction for issue of notice
  • Section 44AD – Presumptive taxation scheme

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/59014022023CW18402023_130041.pdf

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