Facts of the Case

The petitioner challenged multiple reassessment proceedings initiated by the Income Tax Department for Assessment Year 2017–18, including:

  • Notice under Section 148 dated 25 June 2021
  • Notice under Section 148A(b) dated 21 May 2022
  • Order under Section 148A(d) dated 29 July 2022
  • Fresh notice under Section 148 dated 30 July 2022

The proceedings were initiated on the allegation that the petitioner had sold immovable property and failed to disclose capital gains in the return of income.

However, there was a material inconsistency:

  • The Section 148A(b) notice referred to a property at Kingsway Camp
  • The Section 148A(d) order referred to a different property at Rohini with different sale consideration and circle rate

Issues Involved

  1. Whether reassessment proceedings are valid when Section 148A(b) notice and Section 148A(d) order are based on different facts and properties.
  2. Whether reassessment is barred by limitation under Section 149(1)(b) when alleged escaped income is below ₹50 lakhs.
  3. Whether the Assessing Officer can rectify foundational defects by issuing supplementary or amended notice.
  4. Whether failure to provide correct and complete allegations violates principles of natural justice.

Petitioner’s Arguments

  • The notice under Section 148A(b) and order under Section 148A(d) were based on entirely different properties and financial details, rendering proceedings invalid.
  • The alleged escaped income was only ₹11,25,000, which is below ₹50 lakhs, hence time-barred under Section 149(1)(b).
  • The petitioner responded only to the allegations mentioned in the notice and cannot be penalized for incorrect or incomplete information provided by the department.
  • The proceedings lacked a proper jurisdictional foundation.

Respondent’s Arguments

  • The Revenue admitted that there was a mistake in the Section 148A(b) notice due to incomplete information received from another assessing officer.
  • It was argued that the Assessing Officer should be allowed to issue a supplementary or corrected notice under Section 148A(b) incorporating proper details.

Court’s Findings / Order

  • There was a clear mismatch between the notice and the order, including differences in property details, sale consideration, and circle rates.
  • The Assessing Officer proceeded despite being aware of the error, which reflected non-application of mind and negligence.
  • The foundational allegation in the notice was incorrect and contrary to the record, as the original information related to Section 269SS violation, not capital gains.

Final Order:

  • The Court quashed:
    • Notice under Section 148A(b)
    • Order under Section 148A(d)
    • Notice under Section 148
  • Liberty was granted to the Revenue to take fresh action in accordance with law.

Important Clarification

  • The Court reaffirmed that a valid reassessment must be based on correct and specific allegations communicated in the Section 148A(b) notice.
  • A defective notice cannot be cured by subsequent clarification or supplementary notice.
  • Reliance was placed on:
    Catchy Prop-Build Private Ltd. vs ACIT (2022) – where it was held that missing foundational allegations cannot be supplemented later.

Sections Involved

  • Section 148 – Income escaping assessment
  • Section 148A(b) – Show cause notice before reassessment
  • Section 148A(d) – Order deciding whether to proceed
  • Section 149(1)(b) – Time limit for notice
  • Section 269SS – Mode of taking or accepting loans/deposits

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/MMH25112022CW160902022_103304.pdf

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