Facts of the Case

The present writ petition was filed challenging the order dated 23.07.2022 passed under Section 148A(d) of the Income Tax Act, 1961 and the consequential notice issued under Section 148 for Assessment Year 2015–2016.

The proceedings were initiated based on a notice issued under Section 148A(b) alleging that the petitioner company had entered into a transaction amounting to ₹60,00,000/- with M/s Kanhaiya Impex Pvt. Ltd. during Financial Year 2014–2015.

This allegation stemmed from information received pursuant to a search conducted under Section 132 of the Act on the Himanshu Verma Group, wherein it was alleged that certain entities were engaged in providing bogus accommodation entries.

The petitioner categorically denied entering into any such transaction with M/s Kanhaiya Impex Pvt. Ltd.

Issues Involved

  1. Whether reassessment proceedings initiated under Sections 148A(b), 148A(d), and 148 of the Income Tax Act are valid when based on incorrect identification of the counterparty.
  2. Whether an error in the name of the entity, despite correct PAN details, can sustain reassessment proceedings.
  3. Whether such proceedings suffer from non-application of mind and factual inaccuracies.

Petitioner’s Arguments

  • The petitioner contended that it had not entered into any transaction with M/s Kanhaiya Impex Pvt. Ltd.
  • It was argued that the entire reassessment was based on incorrect and factually erroneous information.
  • The petitioner emphasized that the allegation failed at the threshold as the identity of the alleged transaction party itself was incorrect.

Respondent’s Arguments

  • The Revenue submitted that although the name of the entity was incorrectly mentioned, the PAN (Permanent Account Number) was correctly identified.
  • It was argued that PAN being a unique identifier, the discrepancy in the name should not invalidate the proceedings.
  • The Revenue further clarified that the transaction actually pertained to M/s K.G. Finvest Pvt. Ltd., which had the same PAN as mentioned in the information.

Court’s Findings / Order

  • The PAN mentioned (AAACK4032H) did not pertain to M/s Kanhaiya Impex Pvt. Ltd., but to M/s K.G. Finvest Pvt. Ltd.
  • The petitioner’s stand that it had not entered into transactions with M/s Kanhaiya Impex Pvt. Ltd. was factually correct.
  • The reassessment proceedings were based on fundamental factual errors and non-application of mind.

Final Order:

  • The Court set aside:
    • Order passed under Section 148A(d)
    • Notice issued under Section 148
  • Consequently, the reassessment proceedings were quashed.

However, the Court granted liberty to the Assessing Officer to take appropriate steps in accordance with law.

Important Clarification

The Court implicitly clarified that: Correct identification of the entity is essential in reassessment proceedings.

  • Mere reliance on PAN without proper correlation to the entity’s name and facts can render proceedings invalid.
  • Proceedings under Sections 148A and 148 must be based on accurate, verified, and consistent information, failing which they are liable to be quashed.

Sections Involved

  • Section 132 – Search and Seizure
  • Section 131 – Powers regarding discovery and production of evidence
  • Section 148 – Issue of notice for reassessment
  • Section 148A(b) – Inquiry before issuance of notice
  • Section 148A(d) – Order after considering reply

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/59021122022CW119522022_153837.pdf

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