Facts of the Case

The present writ petition was filed by the petitioner challenging the validity of reassessment proceedings initiated under the Income Tax Act, 1961 for Assessment Year 2018–2019. The challenge was directed against:

  • Notice dated 22.03.2022 issued under Section 148A(b)
  • Order dated 30.03.2022 passed under Section 148A(d)
  • Consequential notice issued under Section 148

The case arose from allegations that the petitioner had entered into transactions amounting to ₹28,36,343/- with entities allegedly engaged in providing accommodation entries, namely Naresh Manakchand Jain and Sunstar Reality Developers.

The petitioner denied having entered into any such transactions.

 Issues Involved

  1. Whether failure to grant the mandatory minimum seven days’ time under Section 148A(b) violates principles of natural justice.
  2. Whether non-supply of material relied upon by the Assessing Officer vitiates reassessment proceedings.
  3. Whether reassessment proceedings can be sustained without proper disclosure of information received from the Investigation Wing.

 Petitioner’s Arguments

  • The petitioner contended that the statutory minimum period of seven days to file a reply under Section 148A(b) was not granted.
  • It was argued that the material relied upon by the Assessing Officer, allegedly received from the Investigation Wing, was not furnished.
  • The petitioner asserted that no transactions were undertaken with the alleged entry providers.

 Respondent’s Arguments

  • The Revenue relied upon the order passed under Section 148A(d) to justify the reassessment proceedings.
  • However, the Revenue conceded that the petitioner was entitled to a minimum of seven days to respond to the notice under Section 148A(b).

 Court’s Findings / Order

The Delhi High Court observed:

  • The statutory requirement of granting at least seven days’ time to respond was not complied with.
  • It was unclear whether the material relied upon by the Assessing Officer had been furnished to the petitioner.
  • These procedural lapses warranted reconsideration of the matter.

Accordingly, the Court:

  • Set aside the order passed under Section 148A(d) and the consequential notice under Section 148
  • Directed the Assessing Officer to conduct a de novo hearing
  • Mandated furnishing of all material relied upon to the petitioner
  • Directed passing of a speaking order after granting proper opportunity of hearing

 Important Clarification

The Court emphasized compliance with the Supreme Court judgment in Union of India v. Ashish Aggarwal (2022) 444 ITR 1 (SC), mandating that all material relied upon must be furnished to the assessee before proceeding with reassessment.

Sections Involved

  • Section 148 – Income escaping assessment
  • Section 148A(b) – Opportunity of being heard before issuing notice
  • Section 148A(d) – Order deciding whether it is a fit case for reassessment
  • Principles of Natural Justice 

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS16012023CW4702023_112407.pdf

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