Facts of the Case

The petitioner, M/s Ester Industries Ltd., filed a writ petition challenging the order passed under Section 148A(d) and notice issued under Section 148 of the Income Tax Act for Assessment Year 2018–19.

The reassessment proceedings were initiated on the allegation that the petitioner had engaged in bogus sales transactions. The revenue alleged that sales were made to an entity linked to an alleged entry operator.

The petitioner contended that:

  • The alleged transaction amount was ₹34,62,830, which is below the threshold of ₹50 lakhs required for reopening in certain cases.
  • The original assessment had already been completed after scrutiny on 04 March 2021.
  • The transactions were genuine, conducted through proper banking channels (RTGS), and already offered to tax.

Issues Involved

  1. Whether reassessment proceedings under Sections 148 and 148A were valid despite the amount being below ₹50 lakhs.
  2. Whether reopening is permissible after a completed scrutiny assessment based on new information.
  3. Whether disputed factual issues can be adjudicated in writ jurisdiction.
  4. Whether such transactions could be treated as unexplained cash credit under Section 68.

Petitioner’s Arguments

  • The monetary threshold of ₹50 lakhs for reopening was not satisfied.
  • The reassessment was based on incorrect facts, including misidentification of the counterparty.
  • The transaction had already been examined and accepted during the original scrutiny assessment.
  • Since payments were received via RTGS and accounted for, Section 68 could not be invoked.

Respondent’s Arguments

  • The reassessment proceedings were within the prescribed limitation period.
  • The notice under Section 148A(b) was issued within three years, making the ₹50 lakh threshold inapplicable.
  • New information emerged indicating that the counterparty was an entry operator, which was not available during the original assessment.
  • The transaction could qualify as unexplained cash credit under Section 68 if found to be non-genuine.

Court’s Findings / Order

  • The Court held that the ₹50 lakh threshold was not applicable, as the notice was issued within three years of the relevant assessment year.
  • The reassessment proceedings were not time-barred, as they were conducted within the timeline permitted by the Court in earlier proceedings.
  • Disputed questions of fact (such as identity of the buyer) cannot be adjudicated in writ jurisdiction.
  • The Court observed that if allegations are correct, the transaction may be treated as unexplained cash credit under Section 68.
  • A prior scrutiny assessment does not prevent reassessment if new material information emerges.

Final Order

The writ petition was dismissed, with liberty granted to the petitioner to raise all contentions before the Assessing Officer.

Important Clarifications by the Court

  • Reassessment within 3 years does not require ₹50 lakh threshold.
  • Fresh tangible material can justify reopening even after scrutiny assessment.
  • Writ courts will not decide factual disputes during ongoing assessment proceedings.
  • Section 68 can apply even to sales transactions if they are found to be non-genuine.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3467-DB/MMH02092022CW126772022_183028.pdf

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