Facts of the Case

The petitioner, Aryan Management Services Private Limited, filed a writ petition challenging:

  • The order dated 26 July 2022 passed under Section 148A(d), and
  • The notice issued under Section 148 of the Income Tax Act for AY 2014–15.

The petitioner contended that:

  • It is a small company earning rental income and had no need for external funding.
  • It maintained a single bank account and denied any transaction with the alleged person (Hasmukh Mehta).
  • The material relied upon by the department (including diary entries and statements) was never supplied.

The Revenue alleged that:

  • The petitioner received ₹1.72 crore through accommodation entries as reflected in seized diary records.

Issues Involved

  1. Whether reassessment proceedings under Sections 148 and 148A(d) are valid without supplying underlying material to the assessee.
  2. Whether failure to provide relevant information violates principles of natural justice.
  3. Whether reassessment based on vague and non-specific allegations is sustainable in law.

Petitioner’s Arguments

  • The impugned order was passed without application of mind.
  • No material evidence forming the basis of allegations was provided.
  • The show cause notice was vague and based on borrowed satisfaction.
  • The petitioner’s name did not clearly appear in the alleged documents.

Respondent’s Arguments

  • The Investigation Wing found entries in seized records indicating receipt of ₹1.72 crore.
  • The transactions were allegedly accommodation entries from non-genuine entities.

Court’s Findings

  • The Assessing Officer failed to provide specific details of transactions, including cheque entries.
  • The material relied upon in the notice and order was not supplied despite request.
  • This resulted in denial of a fair opportunity to respond.
  • The Court relied on the principle laid down in Sabh Infrastructure Ltd. vs ACIT (398 ITR 198) regarding disclosure of material.

Court Order / Decision

  • The impugned order under Section 148A(d) and notice under Section 148 were set aside.
  • The matter was remanded back to the Assessing Officer for fresh consideration.
  • Directions issued:
    • AO to provide additional material within 4 weeks
    • Assessee to file reply thereafter
    • AO to decide the matter within 4 weeks thereafter

Important Clarification

  • The Court clarified that rights and contentions of all parties remain open.
  • The judgment reinforces that non-disclosure of material vitiates reassessment proceedings.

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

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