Facts of the Case

The petitioner, Luv Impex Private Limited, challenged reassessment proceedings initiated by the Revenue under the Income Tax Act, 1961. The dispute arose from:

  • Notice dated 07.03.2023 under Section 148A(b)
  • Order dated 28.03.2023 under Section 148A(d)
  • Subsequent notice dated 04.07.2023 under Section 144B

The Revenue alleged that the petitioner had engaged in bogus purchase transactions, amounting to approximately ₹24.31 crores, involving certain entities suspected to be non-genuine.

The petitioner had submitted partial replies along with supporting documents such as:

  • Bank statements
  • Tax invoices
  • E-way bills
  • Ledger accounts

However, the Assessing Officer (AO) proceeded to pass an adverse order without furnishing the underlying material relied upon.

Issues Involved

  1. Whether reassessment proceedings under Sections 148A(b) and 148A(d) are valid when material relied upon is not furnished to the assessee.
  2. Whether failure to disclose incriminating material violates principles of natural justice.
  3. Whether the AO can disregard evidence submitted by the assessee without proper consideration 

Petitioner’s Arguments

  • The AO relied on undisclosed material, thereby denying a fair opportunity to respond.
  • The petitioner had already furnished documentary evidence proving genuineness of transactions.
  • Non-supply of adverse material compromised the defense of the petitioner.
  • The proceedings violated principles of natural justice, making the order unsustainable.

Respondent’s Arguments

  • The Revenue contended that the AO had sufficient material indicating bogus transactions.
  • It was argued that the reassessment proceedings should be allowed to continue.
  • However, the Revenue admitted that the material relied upon by the AO was not furnished to the petitioner.

Court Findings / Order

  • The AO failed to provide relevant material/information relied upon for forming the opinion.
  • This omission violated principles of natural justice.
  • The petitioner’s evidence (bank statements, invoices, e-way bills) was not properly considered.
  • The AO should have confronted the petitioner with adverse material, such as:
    • Non-existent vehicles
    • Suspicious entities
    • Investigation findings

Final Order

  • The order dated 28.03.2023 under Section 148A(d) was set aside.
  • The AO was granted liberty to pass a fresh order.
  • Directions issued:
    • Provide all relevant material to the petitioner
    • Allow filing of further response
    • Grant opportunity of personal hearing

Important Clarification

  • The Court clarified that it did not examine the merits of the allegations.
  • The AO is free to proceed afresh, but only after ensuring compliance with natural justice.

Sections Involved

  • Section 148A(b) – Inquiry before issuance of notice
  • Section 148A(d) – Order for reassessment
  • Section 144B – Faceless assessment procedure
  • Principles of Natural Justice (Audi Alteram Partem)

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS21082023CW110712023_143119.pdf

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