Facts of the Case

The petitioner, Jindal SAW Ltd., filed a writ petition challenging the notice dated 05.08.2024 issued under Section 148A(b) of the Income-tax Act, 1961, the order dated 31.08.2024 passed under Section 148A(d), and the consequential notice dated 31.08.2024 issued under Section 148 for Assessment Year 2018–19.

In the notice issued under Section 148A(b), the Assessing Officer alleged that the petitioner had claimed an unexplained expenditure of ₹79,17,086/- purportedly paid to one Mukesh Pitti, based on Form 26AS and aggregated GST transaction data. It was alleged that since no explanation was furnished by the said party, the expenditure remained unexplained and had escaped assessment.

The petitioner responded stating that no such expenditure was incurred. It was explained that the amount of ₹79,17,086/- was, in fact, income received by the petitioner on account of sale of scrap, on which tax had been collected at source, duly reflected in the books of account, and already subjected to assessment for AY 2018–19.

Despite this explanation, the Assessing Officer passed the order under Section 148A(d) holding that the petitioner had received unexplained income of ₹79,17,086/- from sale of scrap, thereby changing the very basis of the allegation from unexplained expenditure to unexplained income.

Issues Involved

Whether reassessment proceedings are sustainable where the grounds in the order passed under Section 148A(d) materially differ from the allegations set out in the notice issued under Section 148A(b), thereby denying the assessee an effective opportunity of being heard.

Petitioner’s Arguments

The petitioner contended that the reassessment proceedings were vitiated as the impugned order under Section 148A(d) was founded on allegations completely at variance with those set out in the notice under Section 148A(b). It was argued that the petitioner was called upon to explain alleged unexplained expenditure, whereas the order proceeded on the footing of unexplained income, thereby violating principles of natural justice. It was further submitted that the Assessing Officer failed to consider that the amount in question was already disclosed and assessed.

Respondent’s Arguments

The Revenue was unable to controvert the submission that the allegations in the impugned order differed materially from those contained in the notice issued under Section 148A(b).

Court Order / Findings

The Delhi High Court held that the purpose of issuing a notice under Section 148A(b) is to enable the assessee to effectively explain the information suggesting escapement of income. The Court found merit in the petitioner’s contention that the allegations in the order under Section 148A(d) were at variance with those set out in the notice.

The Court observed that since the impugned order proceeded on a completely different factual basis, the petitioner was denied a meaningful opportunity to rebut the allegation. The Court also noted that the Assessing Officer failed to consider the petitioner’s claim that the amount alleged to have escaped assessment was already part of the disclosed and assessed income.

Important Clarification

The Court clarified that reassessment proceedings cannot be sustained where the final decision is based on grounds materially different from those stated in the notice, as such deviation defeats the statutory safeguard embedded in Section 148A and violates principles of natural justice. However, the Court clarified that this would not preclude issuance of a fresh notice if otherwise permissible in law.

Final Outcome

The writ petition was allowed. The Delhi High Court set aside the notice dated 05.08.2024 issued under Section 148A(b), the order dated 31.08.2024 passed under Section 148A(d), and the consequential notice dated 31.08.2024 issued under Section 148 for Assessment Year 2018–19. The Assessing Officer was left at liberty to issue a fresh notice under Section 148A(b), if permissible in law. All pending applications were disposed of accordingly.

 

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769841002_JINDALSAWLTD.VsDEPUTYASSISTANTCOMMISSIONEROFINCOMETAX.pdf

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