Facts of the Case

The present writ petition challenged an order passed under Section 148A(d) along with a reassessment notice issued under Section 148 for AY 2016–17. The proceedings were initiated based on information alleging that the petitioner had received accommodation entries amounting to ₹1,13,50,000 from a company named Kanhaiya Impex Pvt. Ltd. (KIPL), allegedly controlled by a person involved in providing bogus entries.

The petitioner consistently denied having any transaction with KIPL and asserted that no income had escaped assessment.

Subsequently, the Revenue introduced a new stance stating that the transactions were actually with K.G. Finvest Pvt. Ltd., based on PAN details, although all prior communications referred only to KIPL.

Issues Involved

  1. Whether reassessment proceedings under Sections 148 and 148A can be sustained when based on incorrect identification of the alleged entry provider.
  2. Whether reliance on incorrect or inconsistent information vitiates the reassessment notice and order.
  3. Whether PAN-based identification can override incorrect naming in statutory notices without proper disclosure to the assessee.

Petitioner’s Arguments

  • The petitioner contended that it had no dealings whatsoever with Kanhaiya Impex Pvt. Ltd., as alleged in the notice.
  • It was argued that the information supplied by the Revenue lacked factual basis and failed to establish any escaped income.
  • The petitioner emphasized that all notices referred only to KIPL, and no reference was made to K.G. Finvest Pvt. Ltd. during the proceedings.
  • The reassessment was thus arbitrary and based on incorrect assumptions.

Respondent’s Arguments

  • The Revenue argued that although the name of the entity was incorrectly mentioned, the PAN number was correct, which uniquely identified the entity.
  • It was contended that the petitioner had indeed entered into transactions reflected in its bank records with K.G. Finvest Pvt. Ltd., and therefore the reassessment was justified.
  • The mistake in the name was claimed to be a mere clerical error not affecting the validity of proceedings.

Court’s Findings / Order

  • The Court observed that all communications issued to the petitioner referred only to KIPL and not K.G. Finvest Pvt. Ltd.
  • It held that the petitioner’s claim of having no transaction with KIPL appeared to be factually correct.
  • The Court found that the reassessment proceedings suffered from “obvious errors” due to incorrect identification of the entity.

Final Order:

  • The impugned order under Section 148A(d) and notice under Section 148 were set aside.
  • Liberty was granted to the Assessing Officer to proceed afresh in accordance with law.

Important Clarification

  • The judgment underscores that accurate identification of the assessee and transaction counterpart is fundamental in reassessment proceedings.
  • Even if PAN details are correct, failure to communicate correct facts to the assessee violates principles of natural justice.
  • Reassessment cannot be sustained on inconsistent or shifting grounds.

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/59021122022CW120402022_142417.pdf

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