Facts of the Case

The Petitioner challenged:

  • Notice dated 18 May 2022 issued under Section 148A(b)
  • Order passed under Section 148A(d)
  • Subsequent notice under Section 148 dated 22 July 2022

The case pertained to Assessment Year 2015–16, where the Revenue alleged that the Petitioner had taken accommodation entries from 28 bogus entities. However, no specific details or names of such entities were disclosed in the notice.

The Petitioner contended that due to lack of details, it was impossible to respond effectively, violating principles of natural justice.

 Issues Involved

  1. Whether a notice under Section 148A(b) without providing specific material and details is valid in law?
  2. Whether failure to disclose incriminating material violates principles of natural justice?
  3. Whether reassessment proceedings can continue on vague and unsubstantiated allegations?

 Petitioner’s Arguments

  • The Revenue failed to comply with the law laid down in Union of India vs Ashish Agarwal.
  • Allegations were vague, generalized, and unsupported by evidence.
  • Names of alleged bogus entities were not disclosed, making rebuttal impossible.
  • The Petitioner had a large turnover (₹743 crores) and purchases of ₹442 crores, making such vague allegations untenable.
  • Denial of material amounted to violation of natural justice.

 Respondent’s Arguments

  • The Petitioner had allegedly received accommodation entries from Raj Trading Company, one of the bogus entities.
  • The Revenue claimed to possess bank details and supporting material.
  • During proceedings, certain documents were handed over to the Petitioner.

 Court Findings / Judgment

The Delhi High Court held:

  • Mandatory Requirement:
    The Assessing Officer must provide specific material and information in the notice under Section 148A(b) to enable a meaningful response.
  • Violation Identified:
    The notice was vague and devoid of details, effectively asking the assessee to “search for a needle in a haystack”.
  • Reliance on Precedents:
    The Court relied on:
    • Union of India vs Ashish Agarwal
    • Divya Capital One Pvt. Ltd. vs ACIT
    • Sabh Infrastructure Ltd. vs ACIT
  • Final Order:
    • Notices under Sections 148A(d) and 148 were set aside
    • Revenue directed to:
      • Issue fresh supplementary notice with complete material within 3 weeks
      • Allow Petitioner to respond within 3 weeks
      • Pass fresh order under Section 148A(d) within 6 weeks
  • The Court clarified that it did not decide the merits of the case.

 Important Clarification by Court

  • Reassessment proceedings must be transparent and evidence-based
  • Non-disclosure of material = violation of natural justice
  • Assessee must be given a fair and meaningful opportunity to respond
  • Mere allegations without supporting documents cannot sustain reassessment

 Sections Involved

  • Section 148 – Income escaping assessment
  • Section 148A(b) – Show cause notice before reassessment
  • Section 148A(d) – Order deciding whether reassessment should proceed

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3442-DB/MMH01092022CW125042022_165255.pdf

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