Facts of the Case


The petitioners, Ajay Gupta (HUF) and Rajiv Gupta (HUF), challenged reassessment proceedings initiated by the Income Tax Department for AY 2016–17.

  • A Show Cause Notice under Section 148A(b) was issued based on information that:
    • A search conducted on Tradenext Securities Ltd. revealed a large-scale accommodation entry racket.
    • Dummy demat accounts (including Mridul Securities Pvt. Ltd.) were used.
    • Petitioners allegedly received 32,000 shares of TVS Motor Company Ltd. worth ₹94,81,600 through such entries.
  • Petitioners admitted:
    • Purchase and sale of shares through Mridul Securities.
    • Declaring income as Short Term Capital Gain (STCG) in their Return of Income.
  • However, they denied:
    • Any involvement in bogus accommodation entries.

Issues Involved

  1. Whether reassessment proceedings under Sections 148 & 148A were valid?
  2. Whether writ jurisdiction under Article 226 can be invoked in disputed factual matters?
  3. Whether alleged accommodation entries justify reopening of assessment?

 Petitioner’s Arguments

  • Income from sale of shares was already disclosed as STCG, hence no escapement of income.
  • AO wrongly assumed Long Term Capital Gain (LTCG).
  • No relevant material was provided to substantiate allegations.
  • Proceedings were barred by limitation.
  • Relied on:
    • Ashish Agarwal v. Union of India (2022 SCC Online 543)

Respondent’s Arguments

  • Petitioners failed to prove genuineness of purchase transactions.
  • Investigation report clearly indicates:
    • Mridul Securities was an accommodation entry provider.
    • Petitioners were beneficiaries of such entries.
  • Transactions were admitted → requires detailed reassessment.
  • Writ jurisdiction is not maintainable in such fact-based disputes.

 Court Findings / Order

  • The Court held:
    • Petitioners admitted transactions but failed to provide supporting evidence (e.g., bank statements).
    • Allegations involve disputed questions of fact, unsuitable for writ jurisdiction.
    • Reassessment proceedings are not arbitrary.
  • Reliance placed on:
    • Touchstone v. ITO (2022 SCC Online 3011) – limitation issue rejected
    • CIT v. Chhabil Dass Agarwal (2014) 1 SCC 603 – writ not maintainable when alternate remedy exists
  • Final Order:
    • Writ petitions dismissed
    • AO permitted to proceed with reassessment on merits
    • Court clarified it has not adjudicated merits of the case

 Important Clarifications

  • Mere disclosure of sale transaction in ROI does not prove genuineness of purchase.
  • Admission of transaction + investigation inputs = valid ground for reassessment.
  • Writ jurisdiction cannot be used to bypass statutory reassessment mechanism.
  • Courts will not interfere where:
    • Facts are disputed
    • Adequate alternate remedy exists

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/58917112022CW158282022_210048.pdf

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