Facts of the Case

The petitioner challenged the reassessment proceedings initiated for AY 2013–14, including the order passed under Section 148A(d) and the consequential notice under Section 148 of the Income Tax Act.

Initially, a notice dated 19.04.2021 was issued alleging cash deposits of ₹50,00,000 followed by withdrawals. This notice was quashed earlier for non-compliance with mandatory procedure under Section 148A.

Subsequently, pursuant to the Supreme Court ruling in Union of India vs Ashish Agarwal, a fresh notice dated 17.05.2022 was issued providing information about financial transactions.

The petitioner denied such transactions and submitted bank records and confirmation that no debit card was issued.

Later, the Assessing Officer issued another notice dated 23.06.2022 introducing new allegations that the petitioner received ₹50,00,000 from M/s Subhshree Financial Management Pvt. Ltd. as part of accommodation entries routed through shell companies.

The petitioner objected to this on grounds of lack of material and procedural illegality. However, the AO passed an order under Section 148A(d) on 22.07.2022.

Issues Involved

  1. Whether the Assessing Officer can issue a subsequent notice under Section 148A(b) providing additional material after initial notice and reply.
  2. Whether the reassessment proceedings were barred by limitation under Section 149.
  3. Whether the petitioner was denied a proper opportunity of being heard.
  4. Whether the information relied upon constituted valid “material” for reopening assessment.

Petitioner’s Arguments

  • The notice dated 23.06.2022 introduced entirely new grounds, which is impermissible.
  • The AO had no authority to issue a fresh notice after the reply dated 24.05.2022; instead, he should have passed a final order.
  • The proceedings were time-barred under Section 148A(d).
  • No material evidence was provided to support allegations of accommodation entries.
  • The alleged transaction did not qualify as an “asset” under Section 149(1)(b).
  • There was non-application of mind and violation of natural justice.

Respondent’s Arguments

  • The notice dated 23.06.2022 was issued in continuation of earlier material, not a new case.
  • Additional details were provided at the request of the petitioner for better particulars.
  • The petitioner’s bank statement reflected transactions with M/s Subhshree Financial Management Pvt. Ltd.
  • The amount of ₹50,00,000 falls within the scope of Section 149(1)(b), as deposits in bank accounts qualify as “assets”.
  • The petitioner failed to provide any satisfactory explanation for the transaction.

Court’s Findings / Order

  • The Court held that the AO was not precluded from providing further material in response to the petitioner’s request.
  • The notice dated 23.06.2022 was valid as it supplied specific information enabling meaningful response.
  • The petitioner had adequate opportunity and in fact filed a reply but failed to explain the transaction.
  • The Court observed that there were admitted transactions with the concerned company, and the explanation of loan repayment was unsubstantiated.
  • No infirmity was found in the order passed under Section 148A(d).

 Final Order:
The writ petition was dismissed, and reassessment proceedings were allowed to continue.

Important Clarifications

  • Assessing Officer can supplement material during Section 148A proceedings if requested by the assessee.
  • Providing additional details does not amount to changing the basis of reopening if it relates to the same transaction.
  • Failure of the assessee to respond substantively weakens procedural objections.
  • The scope of judicial review at this stage is limited; merits of transactions can be examined during assessment proceedings.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3369-DB/58930082022CW116762022_113709.pdf

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