Facts of the Case

The present writ petition was filed by the Petitioner challenging the validity of the order passed under Section 148A(d) and the consequential notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2015–16.

The case originated from a Show Cause Notice under Section 148A(b), wherein the Assessing Officer (AO) alleged that information was received indicating involvement of Tradenext Securities Ltd. (earlier Lifeline Securities Ltd.) in providing accommodation entries through dummy demat accounts.

  • The Petitioner received 4800 shares of Aurobindo Pharma Ltd. worth ₹56,04,000 from a dummy demat account of Mridul Securities Pvt. Ltd.
  • The said transactions were part of a broader scheme involving bogus Long Term Capital Gains (LTCG) entries.

The Petitioner filed a reply objecting primarily on grounds of limitation and lack of material disclosure, but did not dispute the transaction itself.

Issues Involved

  1. Whether the reassessment proceedings initiated under Sections 148 and 148A were valid in law.
  2. Whether the writ petition is maintainable in cases involving disputed questions of fact regarding genuineness of transactions.
  3. Whether the Petitioner was denied proper opportunity or material as per law.
  4. Whether reassessment proceedings were barred by limitation.

Petitioner’s Arguments

  • The AO wrongly assumed that the Petitioner claimed exempt LTCG, whereas no such claim was made in the return of income.
  • The proceedings were initiated without furnishing relevant material, violating principles laid down in Ashish Agarwal v. Union of India (2022 SCC Online 543).
  • The reassessment was barred by limitation.
  • The matter should be remanded for fresh consideration under Section 148A(d).

Respondent’s Arguments

  • The Petitioner failed to establish the genuineness of the purchase of shares.
  • Investigation reports clearly showed that Mridul Securities Pvt. Ltd. was involved in accommodation entries.
  • The Petitioner was a beneficiary of such transactions, and the issue requires examination during reassessment proceedings.
  • Writ jurisdiction cannot be invoked where facts are disputed and require evidentiary examination.

Court’s Findings / Order

  • The Petitioner failed to produce relevant documentary evidence to establish genuineness of transactions.
  • The transaction with Mridul Securities Pvt. Ltd. was not disputed by the Petitioner.
  • The case involves disputed questions of fact, which cannot be adjudicated under Article 226.
  • Reassessment proceedings cannot be interfered with at this stage.

Accordingly, the writ petition was dismissed, with liberty to the Assessing Officer to decide the matter on merits.

Important Clarifications by the Court

  • Writ jurisdiction is not maintainable where factual disputes exist requiring detailed examination.
  • The Court reaffirmed that the Income Tax Act provides a complete mechanism for reassessment proceedings.
  • Reliance was placed on:
    • Commissioner of Income Tax v. Chhabil Dass Agarwal (2014) 1 SCC 603
    • Touchstone v. Income Tax Officer (2022 SCC Online 3011)

Sections Involved

  • Section 148 – Income escaping assessment
  • Section 148A(b) – Show cause notice before reassessment
  • Section 148A(d) – Order for initiating reassessment
  • Section 10(38) – Exemption of LTCG (as alleged in investigation)
  • Article 226 of the Constitution of India

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/58917112022CW158562022_210814.pdf

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