Facts of the Case

  • The Petitioner challenged:
    • Order dated 17.07.2022 under Section 148A(d), and
    • Notice dated 18.07.2022 under Section 148 for AY 2016–17.
  • A notice under Section 148A(b) alleged that the Petitioner sold immovable property worth ₹6.79 crore.
  • The Petitioner clarified that:
    • No property was sold; rather, property worth ₹8.19 crore was purchased.
    • Multiple replies had already been filed to notices under Section 133(6).
  • Despite acknowledging the factual mistake (sale vs purchase), the Revenue proceeded on the ground that the Petitioner failed to explain the source of funds.

Issues Involved

  1. Whether reassessment proceedings can be sustained when based on incorrect factual assumptions.
  2. Whether failure to specifically ask for explanation of source of funds violates principles of natural justice.
  3. Whether reassessment can proceed on grounds not mentioned in the show cause notice.

Petitioner’s Arguments

  • The notice under Section 148A(b) was based on incorrect facts (sale instead of purchase).
  • No opportunity was provided to explain the source of funds.
  • Reassessment proceedings were initiated on a new ground not mentioned earlier, violating natural justice.
  • Adequate replies had already been furnished to earlier notices under Section 133(6).

Respondent’s Arguments

  • Though there was a factual mistake, the Petitioner was aware of the transaction.
  • The Petitioner ought to have voluntarily explained the source of funds.
  • The reassessment was justified as the source remained unexplained.

Court’s Findings / Order

  • The Court held that:
    • There was a clear violation of principles of natural justice.
    • The Respondent never asked the Petitioner to explain the source of funds.
    • Reassessment cannot be based on grounds not mentioned in the show cause notice.
  • Order Passed:
    • Impugned order under Section 148A(d) and notice under Section 148 were set aside.
    • Liberty granted to Revenue to:
      • Issue a corrigendum and fresh show cause notice under Section 148A(b).
    • Petitioner allowed to:
      • File reply explaining the source of funds.
    • Assessing Officer directed to pass a fresh order as per law.

Important Clarification by Court

  • Reassessment proceedings must strictly adhere to:
    • Correct factual foundation, and
    • Due opportunity of hearing.
  • Authorities cannot shift grounds during proceedings.
  • Natural justice requires that the assessee be specifically informed of allegations. 

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3600-DB/MMH09092022CW131712022_181314.pdf

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