Facts of the Case

The petitioner challenged the validity of the order passed under Section 148A(d) and notice issued under Section 148 for Assessment Year 2015–16. The primary grievance was that the reassessment proceedings were conducted using a deactivated PAN, whereas all financial transactions and tax compliances had been duly undertaken under the correct and active PAN.

The petitioner had previously informed the department regarding surrender and deactivation of the incorrect PAN in 2017 and continued to communicate the same, including as recently as April 2022.

Issues Involved

  1. Whether reassessment proceedings initiated on a deactivated PAN are legally sustainable.
  2. Whether failure to consider replies filed by the assessee invalidates proceedings under Section 148A.
  3. Whether the principles of natural justice were violated in reassessment proceedings.

Petitioner’s Arguments

  • The proceedings were conducted on a non-existent (deactivated) PAN, rendering them invalid.
  • All income and transactions were fully disclosed under the correct PAN; hence, no income had escaped assessment.
  • The department had been repeatedly informed about the deactivation of the incorrect PAN.
  • Replies had already been filed during proceedings under Section 142(1), which were ignored.

Respondent’s Arguments

  • The assessee allegedly failed to respond adequately on merits during reassessment proceedings.
  • Based on available information, income amounting to ₹12,06,84,903/- was determined as having escaped assessment, particularly relating to stock and import entries.

Court Findings / Order

  • The Delhi High Court held that interest of justice required granting an opportunity to the petitioner to respond properly.
  • The impugned order under Section 148A(d) and notice under Section 148 were set aside.
  • The petitioner was permitted to file a supplementary reply within four weeks.
  • The Assessing Officer was directed to pass a fresh order within eight weeks thereafter in accordance with law.
  • The Court further directed that since proceedings were conducted on a deactivated PAN, the Assessing Officer must accept replies via email or hard copy.

Important Clarification by Court

  • The Court expressly clarified that it did not adjudicate on the merits of the case.
  • All rights and contentions of both parties were kept open for reconsideration.

Sections Involved

  • Section 148, Income Tax Act, 1961
  • Section 148A(b), Income Tax Act, 1961
  • Section 148A(d), Income Tax Act, 1961
  • Section 142(1), Income Tax Act, 1961

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/MMH21112022CW159822022_192710.pdf

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