Facts of the Case

The petitioner, SDS Infracon Private Limited, filed a writ petition challenging an assessment order dated 17.04.2021 passed under Section 143(3) read with Section 144B of the Income Tax Act for AY 2018–19.

The petitioner had declared a loss of ₹9,35,218. However, the Assessing Officer (AO) made a substantial addition of ₹20,57,63,618 relating to interest on unsecured loans obtained from five parties.

The petitioner contended that such loans were taken in earlier assessment years and had already been scrutinized without any adverse findings, thereby invoking the principle of consistency.

Issues Involved

  1. Whether the writ petition under Article 226 is maintainable against an assessment order when alternate statutory remedies are available.
  2. Whether the AO’s addition of interest on unsecured loans without clear statutory basis is sustainable.
  3. Whether non-response by lenders to notices under Section 133(6) justifies disallowance of interest.
  4. Whether alleged violation of principles of natural justice occurred due to lack of opportunity of hearing.

 Petitioner’s Arguments

  • The addition of ₹20+ crore lacked factual and legal basis.
  • The principle of consistency was violated since similar transactions were accepted in earlier years.
  • The assessment order failed to specify whether Section 36(1)(iii) or Section 37 was invoked.
  • There was inconsistency between the draft assessment order and the final assessment order.
  • No adequate opportunity of hearing was provided.
  • Supporting documents like bank statements, TDS certificates, and loan confirmations were submitted to prove genuineness.

 Respondent’s Arguments

  • The AO conducted inquiry by issuing notices under Section 133(6).
  • Non-response from lenders raised doubts about genuineness of transactions.
  • The petitioner had not requested a personal hearing during proceedings.
  • The petitioner has an effective alternate statutory remedy under the Income Tax Act.

Court’s Findings / Order

  • The Court held that not every error by the Assessing Officer constitutes a jurisdictional error warranting interference under writ jurisdiction.
  • The AO had jurisdiction to pass the assessment order.
  • Issues raised involved factual and legal disputes suitable for appellate remedy, not writ jurisdiction.
  • The writ petition was dismissed as withdrawn, granting liberty to pursue alternate statutory remedies.

 Important Clarifications by Court

  • Mere non-response to Section 133(6) notices does not automatically render transactions non-genuine.
  • Non-disclosure of interest income by lenders alone cannot be sole ground for disallowance.
  • The petitioner can seek waiver of pre-deposit condition before appellate authority.
  • Observations made by the Court are tentative and will not affect merits before appellate forum.

 Sections Involved

  • Section 143(3), Income Tax Act 1961
  • Section 144B (Faceless Assessment Scheme)
  • Section 133(6) (Power to call for information)
  • Section 36(1)(iii) (Interest deduction)
  • Section 37 (General deduction provision)

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:1652-DB/RAS19052021CW53612021_135156.pdf

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