Facts of the Case

The present writ petition concerns Assessment Year 2019–20, wherein the petitioner, Amit Gupta, was alleged by the Income Tax Department to have engaged in sham transactions involving bogus sales with two entities, namely VKC Nuts Pvt. Ltd. and M/s Arham Foods.

The Revenue alleged that the petitioner recorded sales amounting to approximately ₹1.72 crore, which were claimed to be non-genuine transactions, and that the sale consideration was returned in cash to the said entities.

Pursuant to these allegations, notices under Section 148A(b) of the Income Tax Act, 1961 were issued. The petitioner responded by submitting relevant documents including invoices, e-way bills, and bank statements to substantiate the genuineness of the transactions.

However, despite requesting a personal hearing, no such opportunity was granted before passing the order under Section 148A(d).

Issues Involved

  1. Whether failure to provide a personal hearing under Section 148A(b) violates principles of natural justice.
  2. Whether reassessment proceedings under Sections 148A(d) and 148 can be sustained without proper consideration of the petitioner’s reply and evidence.
  3. Whether the Assessing Officer is required to provide supporting material when alleging bogus transactions.

Petitioner’s Arguments

  • The petitioner contended that the transactions were genuine and supported by documentary evidence, including invoices, e-way bills, and banking records.
  • It was argued that the Assessing Officer failed to consider the reply and documents submitted.
  • The petitioner emphasized that despite specifically requesting a personal hearing, the same was not granted, thereby violating statutory provisions and principles of natural justice.
  • It was further contended that no material was provided by the Revenue to substantiate the allegation that cash was returned.

Respondent’s Arguments

  • The Revenue argued that since the petitioner had already filed a written reply, grant of personal hearing was not mandatory.
  • It was contended that the reassessment proceedings were valid based on available material indicating bogus transactions.

Court’s Findings / Order

  • Non-grant of personal hearing is contrary to Section 148A(b) and CBDT Circulars dated 01.08.2022 and 22.08.2022.
  • The Assessing Officer failed to deal with the petitioner’s submissions and evidence.
  • Once the petitioner denied allegations with documentary proof, the burden shifted to the Revenue to establish a prima facie case.
  • There was a clear violation of principles of natural justice.

Final Order:

  • The impugned order under Section 148A(d) dated 25.03.2023 and consequential notice under Section 148 were set aside.
  • The matter was remanded back for fresh adjudication (de novo) after granting proper opportunity of hearing.

Important Clarifications by Court

  • The observations made by the Court are limited to procedural lapses and will not affect the merits of the case.
  • The Assessing Officer must:
    • Pass a reasoned (speaking) order
    • Consider all material submitted by the petitioner
    • Provide any material relied upon by the Revenue
    • Grant proper opportunity of hearing

Sections Involved

  • Section 148A(b), Income Tax Act, 1961
  • Section 148A(d), Income Tax Act, 1961
  • Section 148, Income Tax Act, 1961
  • Principles of Natural Justice
  • CBDT Circulars dated 01.08.2022 and 22.08.2022

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/60808052023CW58702023_150533.pdf  

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