Facts of the Case

The present writ petition was filed challenging the order dated 25.07.2022 passed under Section 148A(d) of the Income Tax Act, 1961 along with the consequential notice issued under Section 148 for Assessment Year 2016–2017.

During assessment proceedings for AY 2017–2018, the Assessing Officer (AO) identified unsecured loan transactions amounting to ₹2.7 crores received by the petitioner from three entities. These entities were suspected to be accommodation entry providers based on various indicators such as common addresses, non-availability during inspection, common directors, and weak financial capacity.

The petitioner, in response dated 31.05.2022, requested copies of enquiry reports, inspection findings, and all material relied upon by the revenue. However, such material was not furnished before passing the impugned order.

Issues Involved

  1. Whether the order passed under Section 148A(d) was time-barred under the statutory limitation period.
  2. Whether non-supply of underlying material relied upon by the Assessing Officer vitiates the reassessment proceedings.

Petitioner’s Arguments

  • The petitioner contended that the impugned order dated 25.07.2022 was passed beyond the limitation period prescribed under Section 148A(d).
  • It was argued that the limitation period should be computed from the end of May 2022 (i.e., 30.06.2022), making the order time-barred.
  • The petitioner further submitted that the AO failed to provide the material and information relied upon, despite specific requests, thereby violating principles of natural justice.

Respondent’s Arguments

  • The Revenue argued that the petitioner’s reply dated 31.05.2022 was only a partial response.
  • It was contended that additional time was granted until 27.06.2022 to file a complete reply, and therefore, the limitation period would commence from 30.06.2022.
  • Accordingly, the order dated 25.07.2022 was within the permissible statutory timeline.

Court’s Findings / Order

On Limitation

The Court held that the petitioner’s reply was incomplete and that additional time was granted by the AO. Therefore, the limitation period would begin from the end of June 2022, making the order dated 25.07.2022 within the prescribed timeframe.

On Non-Supply of Material

The Court observed that the material relied upon by the Revenue was not furnished to the petitioner. Relying on the Supreme Court judgment in Union of India v. Ashish Aggarwal (2022), the Court emphasized that such material must be provided to the assessee.

Final Order

  • The impugned order under Section 148A(d) and notice under Section 148 were set aside.
  • The matter was remanded to the Assessing Officer.
  • Directions issued:
    • AO to provide all underlying material within 3 weeks.
    • Petitioner to file response within 3 weeks thereafter.
    • Opportunity of personal hearing to be granted before further action.

Important Clarifications

  • A “partial reply” by the assessee can extend the limitation timeline under Section 148A(d).
  • However, non-supply of relied-upon material is fatal to reassessment proceedings.
  • Compliance with principles of natural justice is mandatory in reassessment proceedings.
  • The judgment reinforces procedural safeguards laid down in Union of India v. Ashish Aggarwal.

Sections Involved

  • Section 148A(d), Income Tax Act, 1961
  • Section 148, Income Tax Act, 1961

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/59022122022CW175772022_184859.pdf

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