Facts of the Case

The Petitioners, Ajay Gupta (HUF) and Rajiv Gupta (HUF), filed writ petitions challenging:

  • Order under Section 148A(d) of the Income Tax Act, 1961
  • Notice under Section 148 for reassessment (AY 2016–17)

The reassessment proceedings were initiated based on information that:

  • A search conducted on Tradenext Securities Ltd. revealed a racket involving bogus accommodation entries through dummy demat accounts.
  • The Petitioners allegedly received 32,000 shares of TVS Motor Company Ltd. worth ₹94,81,600 from Mridul Securities Pvt. Ltd., identified as a dummy entity.
  • The Revenue alleged that such transactions were part of a scheme to generate fictitious capital gains.

The Petitioners admitted:

  • Purchase and sale of shares
  • Claiming Short-Term Capital Gains (STCG) on sale

However, they denied any involvement in bogus transactions.

Issues Involved

  1. Whether reassessment proceedings under Sections 147/148/148A were validly initiated?
  2. Whether writ jurisdiction under Article 226 of the Constitution is maintainable in cases involving disputed facts?
  3. Whether the alleged transaction constituted a bogus accommodation entry leading to escaped income?
  4. Whether non-supply of material and limitation issues invalidate reassessment?

Petitioner’s Arguments

    • Income from sale of shares was duly disclosed as STCG in the Return of Income.
    • There was no escapement of income, hence reopening is invalid.
    • The Assessing Officer wrongly assumed LTCG instead of STCG.
    • Relevant material was not provided, violating principles laid down in Ashish Agarwal v. Union of India (2022 SCC Online 543).
    • Proceedings were allegedly barred by limitation.
    • Transactions were genuine as shares were traded through recognized stock exchange.

Respondent’s Arguments (Revenue)

    • The Petitioners were beneficiaries of accommodation entries through Mridul Securities.
    • The genuineness of purchase of shares was not established.
    • The Petitioners failed to produce supporting documents (bank statements, etc.).
    • Since transactions were admitted, detailed scrutiny in reassessment was justified.
    • Writ jurisdiction should not be invoked where factual disputes exist.

 Court’s Findings / Order

  • The Petitioners admitted the transactions, but failed to provide supporting evidence of genuineness.
  • The case involved disputed questions of fact, which cannot be adjudicated under Article 226.
  • Reassessment proceedings were based on credible information and were not arbitrary.
  • The issue of limitation was already settled in:
    • Touchstone v. Income Tax Officer (2022 SCC Online Del 3011)
  • Reliance on Anu Gupta v. ITO was misplaced, as in the present case, the reply was duly considered.
  • The Court reaffirmed:
    • Assessees must follow statutory remedies under the Act rather than bypassing them through writ jurisdiction.
    • Relied on Commissioner of Income Tax v. Chhabil Dass Agarwal (2014) 1 SCC 603.

 Final Order:
The writ petitions were dismissed, and reassessment proceedings were allowed to continue.

Important Clarifications by Court

  • Writ jurisdiction is not maintainable where:
    • Facts are disputed
    • Adequate alternative remedies exist under tax law
  • Court clarified:
    • It has not examined merits of the case
    • AO will decide independently based on evidence

Sections Involved

  • Section 147 – Income escaping assessment
  • Section 148 – Issue of notice for reassessment
  • Section 148A(b) – Show cause notice before reassessment
  • Section 148A(d) – Order for initiation of reassessment
  • Section 10(38) – Exemption on LTCG (relevant to alleged modus operandi)
  • Article 226 – Writ jurisdiction

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/58917112022CW158292022_210224.pdf

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