Facts of the Case

The petitioner challenged:

  • Notice dated 31 March 2021 issued under Section 148, and
  • Assessment order dated 30 March 2022 passed under Section 147 read with Section 144B for AY 2013–14.

The petitioner had:

  • Sold shares through a SEBI-registered broker on the Bombay Stock Exchange,
  • Received consideration via banking channels, and
  • Paid Securities Transaction Tax (STT).

Despite filing the return on 27 April 2021, the assessment order incorrectly recorded non-filing of return.

Further, the reasons for reopening were supplied only on 26 March 2022, just days before passing the assessment order.

Issues Involved

  1. Whether reassessment proceedings were valid when reasons were supplied belatedly.
  2. Whether passing an assessment order without deciding objections violates due process.
  3. Whether non-compliance with Section 144B and principles of natural justice invalidates reassessment.

Petitioner’s Arguments

  • The petitioner had duly filed the return in response to notice under Section 148.
  • The Assessing Officer failed to:
    • Provide reasons within reasonable time,
    • Allow adequate opportunity to object,
    • Issue a show cause-cum-draft assessment order under Section 144B.
  • The assessment order was passed hastily without disposing of objections filed within permissible time.

Respondent’s Arguments

  • The writ petition was not maintainable.
  • The petitioner had an alternative remedy before the appellate authority.

Court Findings / Judgment

  • The procedure laid down in GKN Driveshafts (India) Ltd. vs ITO was not followed.
  • Reasons for reopening were supplied at a very late stage, depriving the petitioner of meaningful opportunity.
  • Objections filed by the petitioner were not properly adjudicated before passing the assessment order.
  • The reassessment proceedings were conducted in violation of principles of natural justice.

Court Order

  • The impugned:
    • Assessment Order,
    • Demand Notice, and
    • Penalty Notice (all dated 30 March 2022)
      were set aside.
  • The Assessing Officer was directed to:
    • Decide the objections dated 28 March 2022,
    • Follow due process within 90 days,
    • Provide opportunity of hearing if required.
  • Rights and contentions of all parties were kept open.

Sections Involved

  • Section 147 – Income Escaping Assessment
  • Section 148 – Issue of Notice for Reassessment
  • Section 144B – Faceless Assessment Procedure
  • Principles laid down in GKN Driveshafts (India) Ltd. vs ITO (2003) 1 SCC 72

Important Clarification

  • The Court reaffirmed that:
    • Supply of reasons and disposal of objections is mandatory before reassessment.
    • Any deviation from GKN Driveshafts procedure vitiates the entire reassessment.
  • Compliance with Section 144B (faceless assessment) must include procedural fairness and opportunity to respond.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:1495-DB/MMH25042022CW64892022_231841.pdf

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