Facts of the Case

The petitioner, Yogender Mohan Rustagi, challenged the notice dated 08.08.2024 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 of the Income-tax Act, 1961 for Assessment Year 2018–19.

The reassessment proceedings were initiated on the basis of information allegedly unearthed during a search conducted at the premises of M/s VKC Nuts Private Limited. During the search, certain hard disk drives were seized, and the statement of the Managing Director of M/s VKC Nuts was recorded. According to the Assessing Officer, data retrieved from the seized hard disk reflected transactions between M/s VKC Nuts and “Big Wave Traders,” which in turn showed transactions with M/s Mata Din Bhagwan Dass, the proprietorship concern of the petitioner.

The notice under Section 148A(b) reproduced a ledger account maintained in the books of VKC Group, showing several entries described as “cash receipts” and “cash payments.” On the basis of these entries, the Assessing Officer alleged that the petitioner had received cash and that his income had escaped assessment.

The petitioner filed a detailed reply on 14.08.2024 and a further elaborated, entry-wise reply on 30.08.2024, explaining that the so-called cash entries were, in fact, transactions carried out through banking channels and were incorrectly reflected as cash entries in the books of VKC Group.

Issues Involved

Whether the order passed under Section 148A(d) was sustainable where the Assessing Officer misinterpreted ledger entries, ignored the petitioner’s detailed explanation, and proceeded on erroneous factual assumptions while granting approval for issuance of notice under Section 148.

Petitioner’s Arguments

The petitioner contended that the entire basis of the reassessment was flawed, as the ledger entries relied upon by the Assessing Officer did not show receipt of cash by the petitioner but rather reflected payments made by him. It was argued that the Assessing Officer failed to correctly read the ledger, ignored the petitioner’s detailed reply dated 30.08.2024, and mechanically concluded that income had escaped assessment without examining whether the alleged cash entries actually represented banking transactions.

Respondent’s Arguments

The Revenue sought to contend that the petitioner had paid amounts through banking channels and received equivalent cash back from the VKC Group. However, on a specific query from the Court, the Revenue was unable to point out any allegation to that effect in the notice issued under Section 148A(b).

Court Order / Findings

The Delhi High Court examined the ledger account reproduced in the notice and held that a plain reading of the ledger demonstrated that the entries reflected cash payments by the petitioner and not cash receipts. The Court observed that the Revenue’s contention that the petitioner had received cash was erroneous and contrary to the ledger itself.

The Court further noted that the Assessing Officer had failed to consider the petitioner’s detailed reply dated 30.08.2024, which provided entry-wise explanations and clarified that the transactions were routed through banking channels. The impugned order under Section 148A(d) did not examine whether the banking entries furnished by the petitioner corresponded with the ledger entries relied upon in the notice.

The Court held that the Assessing Officer had proceeded mechanically, without proper application of mind, and on the basis of incorrect factual assumptions.

Important Clarification

The Court clarified that while the Assessing Officer is entitled to seek further information and examine explanations offered by the assessee, reassessment proceedings cannot be initiated on the basis of misreading of documents or by ignoring material replies furnished by the assessee. Proper consideration of the assessee’s response is an integral part of the procedure under Section 148A.

Final Outcome

The writ petition was disposed of by setting aside the order dated 31.08.2024 passed under Section 148A(d) and the notice dated 31.08.2024 issued under Section 148 for Assessment Year 2018–19. The matter was remanded to the Assessing Officer to consider the case afresh after duly examining the replies furnished by the petitioner and after granting an appropriate opportunity. All pending applications were disposed of accordingly.

 

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769841667_YOGENDERMOHANRUSTAGIVsASSISTANTCOMMISSIONEROFINCOMETAXCENTRALCIRCLE28DELHIANR..pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.