Facts of the Case

The present writ petition was filed challenging the order dated 29 March 2022 passed under Section 148A(d) of the Income Tax Act, 1961 and the consequential notice dated 04 April 2022 issued under Section 148 for Assessment Year 2018–19.

The Respondent issued a show cause notice under Section 148A(b) alleging that the Petitioner had made an investment of ₹85,85,500 during the relevant assessment year. The Petitioner was directed to respond within a limited timeframe, which was less than the statutory minimum period of seven days.

The Petitioner submitted a reply dated 24 March 2022 explaining the source of investment through proper channels. However, the Assessing Officer passed the impugned order without considering the said reply.

Issues Involved

  1. Whether the order passed under Section 148A(d) without granting adequate opportunity violates principles of natural justice.
  2. Whether non-consideration of the assessee’s reply violates the statutory mandate under Section 148A(c) of the Income Tax Act.
  3. Whether reassessment proceedings initiated under Section 148 are sustainable when procedural safeguards are ignored.

Petitioner’s Arguments

  • The Petitioner contended that the show cause notice under Section 148A(b) did not provide the mandatory minimum time of seven days to respond.
  • It was argued that a detailed reply was filed explaining the alleged investment and its legitimate sources.
  • The impugned order merely reiterated the allegations in the notice without considering the reply submitted.
  • The proceedings were conducted in violation of principles of natural justice.

Respondent’s Arguments

  • The Respondent/Revenue contended that income had escaped assessment for AY 2018–19.
  • It relied upon the order under Section 148A(d), stating that the amount of ₹85,85,500 was not disclosed in the Petitioner’s Income Tax Return.

Court’s Findings / Order

  • The impugned order was passed in haste and in violation of principles of natural justice due to inadequate time provided to the Petitioner.
  • The Assessing Officer failed to consider the Petitioner’s reply dated 24 March 2022, despite it being on record.
  • Section 148A(c) uses the term “shall”, making it mandatory for the Assessing Officer to consider the assessee’s reply before passing an order.

Final Order:

  • The order under Section 148A(d) and the notice under Section 148 were quashed.
  • The matter was remanded back to the Assessing Officer for fresh consideration after taking into account the Petitioner’s reply and passing a reasoned order.

Important Clarification

  • Compliance with Section 148A procedure is mandatory, not directory.
  • Non-consideration of reply and denial of reasonable opportunity renders reassessment proceedings invalid.
  • Even if income is suspected to have escaped assessment, procedural safeguards cannot be bypassed.

The Court relied on a similar precedent:

  • Fena Pvt. Ltd. vs ACIT Circle 7-1 & Anr. (W.P.(C) 6553/2022), where reassessment proceedings were quashed for non-consideration of reply.

Sections Involved

  • Section 148 – Income escaping assessment
  • Section 148A(b) – Show cause notice before reassessment
  • Section 148A(c) – Consideration of reply
  • Section 148A(d) – Order for initiating reassessment

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:1950-DB/MMH18052022CW76252022_175706.pdf

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