Facts of the Case

The present writ petition concerns Assessment Year (AY) 2019–20, wherein the petitioner, Quickroutes International Pvt. Ltd., challenged the validity of reassessment proceedings initiated by the Income Tax Department.

The Assessing Officer (AO) issued:

  • Notice under Section 148A(b) dated 27.03.2023
  • Order under Section 148A(d) dated 01.05.2023
  • Consequential notice under Section 148 dated 01.05.2023

The allegation against the petitioner was that it had undertaken foreign currency transactions and outward remittances amounting to ₹9.10 crores, based on information received from IDFC First Bank Ltd., and had failed to file a Return of Income (ROI).

The petitioner clarified that the transaction pertained to a share purchase agreement (SPA) executed with F1 Info Solutions and Services Pvt. Ltd. in FY 2017–18, and part of the amount was repatriated due to non-fulfillment of contractual conditions.

Issues Involved

  1. Whether reassessment proceedings under Sections 148A(b), 148A(d), and 148 were validly initiated without proper inquiry.
  2. Whether the Assessing Officer violated principles of natural justice by not seeking necessary documents before passing the order.
  3. Whether the conclusion of “income escaping assessment” was justified without adequate verification. 

Petitioner’s Arguments

  • The petitioner submitted detailed replies explaining the nature of the foreign remittance.
  • It was contended that:
    • The transaction arose from a legitimate share purchase agreement.
    • A portion of the funds was repatriated due to non-fulfillment of contractual contingencies.
    • The petitioner was both the remitter and beneficiary of the repatriated amount.
  • The AO failed to consider the explanations and supporting material properly.

Respondent’s Arguments

  • The Revenue argued that:
    • The petitioner failed to provide the Share Purchase Agreement (SPA).
    • There was no independent verification of the transactions from IDFC Bank.
    • The magnitude of the transaction and absence of ROI justified reopening of assessment. 

Court’s Findings / Order

  • The Assessing Officer failed to take basic procedural steps, such as:
    • Calling for the SPA
    • Seeking confirmation from the bank
  • The AO passed the order under Section 148A(d) without proper inquiry, which was not justified.

Order:

  • The impugned order dated 01.05.2023 under Section 148A(d) was set aside.
  • The consequential notice under Section 148 was also quashed.
  • The AO was granted liberty to:
    • Conduct fresh proceedings
    • Seek necessary documents
    • Provide material relied upon
    • Grant personal hearing to the petitioner

The Court clarified that it had not adjudicated on merits and the AO may pass a fresh order in accordance with law.

Important Clarifications

  • Reassessment proceedings must follow due process and proper inquiry before concluding income escapement.
  • The AO must provide a fair opportunity and necessary material to the assessee.
  • Orders passed mechanically without verification are liable to be set aside. 

Sections Involved

  • Section 148 – Income escaping assessment
  • Section 148A(b) – Show cause notice before reassessment
  • Section 148A(d) – Order for initiating reassessment
  • Income Tax Act, 1961 

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS23082023CW111412023_150731.pdf

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