Facts of the Case

  • Order dated 26.07.2022 passed under Section 148A(d)
  • Notice issued under Section 148 for AY 2014–15

The petitioner company:

  • Is a non-trading entity earning rental income
  • Maintains a single bank account
  • Claimed no transaction with alleged person (Hasmukh Mehta)

The reassessment was initiated based on:

  • Alleged entries in a seized diary
  • Claim that the petitioner received ₹1.72 crore via accommodation entries

Issues Involved

  1. Whether reassessment proceedings under Sections 148A(d) and 148 are valid when material relied upon is not supplied to the assessee.
  2. Whether a vague show cause notice based on borrowed satisfaction is legally sustainable.
  3. Whether failure to provide details violates principles of natural justice.

Petitioner’s Arguments

  • The impugned order was passed without application of mind.
  • No material evidence (diary, statements) was provided.
  • The petitioner’s name did not clearly appear in alleged records.
  • Allegations were vague, non-specific, and inconsistent.
  • No transaction existed with the alleged entry provider.
  • Proceedings were based on borrowed satisfaction.

Respondent’s Arguments

  • Investigation wing found entries in seized diary.
  • Petitioner allegedly received ₹1.72 crore via cheques.
  • Transactions were claimed to be non-genuine accommodation entries.
  • Entities involved were paper companies with no real business.

 Court’s Findings / Order

The Delhi High Court held:

  • No specific details of alleged transactions were provided in:
    • Section 148A(b) notice
    • Section 148A(d) order
  • The Assessing Officer:
    • Failed to share material information despite request
    • Denied the petitioner a fair opportunity to respond
  • This violated:
    • Principles of natural justice
    • Law laid down in Sabh Infrastructure Ltd. vs ACIT (398 ITR 198)

Final Order

  • Order under Section 148A(d) set aside
  • Notice under Section 148 quashed
  • Matter remanded back to Assessing Officer
  • AO directed to:
    • Provide material within 4 weeks
    • Allow response within further 4 weeks
    • Decide afresh as per law

Important Clarifications by Court

  • Non-supply of material invalidates reassessment proceedings
  • Assessee must be given a meaningful opportunity of hearing
  • Revenue cannot rely on undisclosed evidence
  • Rights and contentions of both parties kept open

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3325-DB/MMH29082022CW124222022_182442.pdf

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