Facts of the Case

The present writ petition was filed challenging:

  • Assessment Order dated 03.03.2023 passed under Sections 147 read with 144B
  • Notice under Section 148A(b) dated 17.03.2022
  • Order under Section 148A(d) dated 31.03.2022
  • Consequential notice under Section 148

The allegation against the petitioner was that he had under-reported the sale consideration of certain immovable properties.

  • As per registered documents: ₹1,41,00,000
  • Alleged actual consideration: ₹2,42,50,000
  • Alleged undisclosed income: ₹1,01,50,000

The basis of this allegation was a diary seized by the Enforcement Directorate from a third party, which indicated a possible cash component in the transaction.

Issues Involved

  1. Whether reassessment proceedings under Sections 147/148 were validly initiated based on third-party material.
  2. Whether the Assessing Officer violated principles of natural justice by not granting adequate opportunity to the petitioner.
  3. Whether passing an assessment order without considering a request for adjournment is legally sustainable.

Petitioner’s Arguments

  • The petitioner contended that:
    • He had disclosed the entire transaction in his return of income.
    • No opportunity was granted to properly rebut the allegation of a cash component.
    • A request for extension of time (till 07.03.2023) was made to submit supporting documents.
    • The Assessing Officer passed the order without considering this request, thereby denying fair hearing.

Respondent’s Arguments

  • The Revenue argued that:
    • Information from the Enforcement Directorate suggested escaped income.
    • The petitioner failed to provide supporting proof for his claims.
    • Therefore, reassessment proceedings were validly initiated under the Act.

 Court’s Findings / Order

  • The Assessing Officer failed to provide adequate opportunity of hearing.
  • The request for adjournment made by the petitioner was not considered at all.
  • This amounted to a clear violation of principles of natural justice.

Order:

  • Assessment Order dated 03.03.2023 set aside
  • Order under Section 148A(d) quashed
  • Notice under Section 148 also invalidated

However:

  • The Revenue was given liberty to restart proceedings from Section 148A(b) stage
  • The petitioner was granted 4 weeks to file a reply
  • The AO must pass a fresh order after granting personal hearing 

 Important Clarification by Court

  • Even where information suggests escaped income, procedural fairness cannot be bypassed.
  • Natural justice is mandatory in reassessment proceedings.
  • Denial of reasonable opportunity automatically vitiates the entire assessment process. 

 Provisions 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 deciding whether reassessment is fit
  • Section 144B – Faceless assessment scheme

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS02052023CW56552023_115932.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.