Facts of the Case

The petitioner, Sunil Malik, challenged reassessment proceedings initiated by the Income Tax Department for Assessment Year 2015–16. The proceedings arose from allegations that the petitioner was engaged in high-value share transactions amounting to approximately ₹30 crores.

The Revenue issued:

  • Notice dated 23.06.2021
  • Show cause notice under Section 148A(b) dated 01.06.2022
  • Order under Section 148A(d) dated 31.07.2022
  • Consequential notice under Section 148

The petitioner contended that his share transactions had already been examined earlier under Section 133(6), and no new material was provided to justify reassessment.

 Issues Involved

  1. Whether reassessment proceedings under Section 148A can be sustained without providing relevant material to the assessee.
  2. Whether mere allegations of high-value transactions without substantiated evidence justify reopening of assessment.
  3. Whether failure to establish creditworthiness alone constitutes valid grounds for reassessment.

 Petitioner’s Arguments

  • The petitioner argued that he was not engaged in the business of share trading, and the transactions were limited and disclosed.
  • It was contended that:
    • No material or information was supplied to support allegations of ₹30 crore transactions.
    • Earlier scrutiny under Section 133(6) had already examined the transactions.
    • The impugned order lacked reasoning and failed to establish escapement of income.
  • The petitioner emphasized violation of principles of natural justice due to non-disclosure of relevant information.

 Respondent’s Arguments

  • The Revenue contended that:
    • The petitioner was involved in high-value share transactions.
    • The company involved (Vakrangee Ltd.) was under investigation by Securities and Exchange Board of India.
    • The petitioner failed to:
      • Prove source of investment
      • Provide demat account details
      • Establish creditworthiness
  • It was argued that income had escaped assessment based on financial inconsistencies.

 Court’s Findings / Judgment

  • The Revenue failed to provide any concrete material or information to substantiate the allegation of ₹30 crore transactions.
  • The order under Section 148A(d) was deficient and lacked proper reasoning.
  • Mere suspicion or lack of explanation by the assessee cannot substitute for tangible material required to reopen assessment.

Order

  • The impugned order under Section 148A(d) and consequential proceedings were set aside.
  • The matter was remanded with directions:
    • Conduct fresh proceedings (de novo)
    • Provide relevant information to the petitioner
    • Grant personal hearing
    • Pass a reasoned (speaking) order

Important Clarifications by the Court

  • Disclosure of material is mandatory before initiating reassessment proceedings.
  • Reassessment cannot be based on vague allegations or suspicion.
  • The Assessing Officer must ensure procedural fairness and transparency.
  • Opportunity of hearing and access to information are essential components of natural justice.

 Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/59017012023CW5122023_112423.pdf

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