Issues Involved

  1. Whether reassessment proceedings under Sections 148 and 148A are valid without furnishing material information relied upon.
  2. Whether non-disclosure of alleged reports and transaction details violates principles of natural justice.
  3. Whether inconsistency between show cause notice and final order vitiates reassessment proceedings.

Petitioner’s Arguments

  • The show cause notice lacked specific information or details regarding alleged escaped income.
  • The department failed to disclose:
    • Names of vendors
    • Details of transactions
    • Alleged investigation report
  • The original scrutiny assessment had already examined business purchases, and no adverse finding was recorded.
  • GST data supported the genuineness of transactions, and input tax credit was accepted.
  • The order under Section 148A(d) relied on new grounds not mentioned in the show cause notice, rendering the proceedings invalid.

Respondent’s Arguments

  • The reassessment was initiated due to mismatch between ITR and GST data.
  • Analysis of third-party GST information indicated routing of funds through bogus purchases.
  • The department justified issuance of notice under Section 148A(b) based on such information.

Court’s Findings / Order

  • The Delhi High Court held that:
    • The show cause notice and the order under Section 148A(d) were based on different grounds, which is impermissible.
    • No details of alleged non-filers or bogus entities were provided to the Petitioner.
    • The report forming the basis of allegations was not supplied, violating principles of natural justice.
    • There were no specific allegations enabling the Petitioner to respond effectively.

Final Order:

  • The impugned order under Section 148A(d) and notice under Section 148 were quashed.
  • Liberty was granted to the department to:
    • Provide relevant material and reports
    • Proceed afresh in accordance with law
  • Rights and contentions of both parties were kept open.

Important Clarifications

  • Reassessment cannot be sustained where:
    • Material evidence is not disclosed to the assessee
    • Show cause notice lacks specificity
    • Final order introduces new grounds
  • Principles of natural justice require full disclosure of relied-upon documents before passing an order under Section 148A(d).

Sections Involved

  • Section 148 – Income escaping assessment
  • Section 148A(b) – Show cause notice before reassessment
  • Section 148A(d) – Order for reassessment
  • Section 143(3) – Scrutiny assessment
  • Section 144B – Faceless assessment

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:2909-DB/MMH01082022CW113382022_194043.pdf

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