Facts of the Case

The petitioner challenged the validity of an order passed under Section 148A(d) and a consequential notice issued under Section 148 for Assessment Year 2016–17. The primary contention was that the entire reassessment proceeding had been conducted on a PAN that had already been deactivated.

The petitioner had previously informed the Income Tax Department about the correct and active PAN and had surrendered the incorrect PAN in 2017. The department had formally deactivated the incorrect PAN on 05 December 2017. Despite multiple communications, including a recent one dated 18 April 2022, the department proceeded using the deactivated PAN.

The respondent alleged that income amounting to Rs. 10,15,17,895/- had escaped assessment due to non-response by the assessee.

Issues Involved

  1. Whether reassessment proceedings under Sections 148 and 148A(d) are valid when conducted on a deactivated PAN.
  2. Whether the assessee was denied a proper opportunity of being heard under Section 148A(b).
  3. Whether procedural lapses invalidate reassessment proceedings.

Petitioner’s Arguments

  • The proceedings were invalid as they were conducted on a deactivated PAN.
  • The petitioner had duly complied with all tax obligations using the correct PAN.
  • The incorrect PAN had already been surrendered and deactivated by the department itself.
  • No income had escaped assessment as all transactions were duly recorded in audited financial statements.
  • Proper replies had been filed during earlier proceedings under Section 142(1).

Respondent’s Arguments

  • The assessee allegedly failed to respond on merits during reassessment proceedings.
  • Based on available material, income escaping assessment was determined relating to stock and import entries.

Court’s Findings / Order

  • The interest of justice required granting the petitioner an opportunity to file a supplementary reply.
  • 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 under Section 148A(d) within eight weeks thereafter.
  • The Assessing Officer was instructed to accept replies via email or physical mode considering the issue of deactivated PAN.

Important Clarification by Court

  • The Court expressly clarified that it had not adjudicated on the merits of the case.
  • All rights and contentions of the parties were kept open.

Sections Involved

  • Section 148 – Income escaping assessment
  • Section 148A(b) – Opportunity before issuance of notice
  • Section 148A(d) – Order after considering reply
  • Section 142(1) – Inquiry before assessment
  • Income Tax Act, 1961

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/MMH10112022CW154142022_185352.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.