Facts of the Case

The present writ petition was filed challenging the order passed under Section 148A(d) and the consequential notice issued under Section 148 of the Income Tax Act, both dated 15 July 2022 for Assessment Year 2016–17.

The petitioner was issued a notice under Section 148A(b) alleging that it had:

  • Received accommodation entries amounting to ₹99,00,000 from a bogus entity, and
  • Purchased immovable property worth ₹13,10,58,000 from unexplained sources.

The petitioner submitted a detailed reply disputing these allegations.

Issues Involved

  1. Whether reassessment proceedings under Sections 147/148 can be initiated on incorrect factual assumptions.
  2. Whether reassessment based on change of opinion is legally sustainable.
  3. Whether an order under Section 148A(d) is valid when the reply of the assessee is not considered.

Petitioner’s Arguments

  • The alleged transaction pertained to Financial Year 2016–17 (AY 2017–18) and not AY 2016–17.
  • The petitioner had already disclosed purchases exceeding ₹55 crores, much higher than the alleged amount.
  • The issue of property purchase had already been examined during original scrutiny assessment and accepted vide order dated 19 December 2018.
  • Reassessment proceedings were initiated merely on change of opinion, without any fresh tangible material.
  • The impugned order was passed without considering the detailed reply, rendering it invalid.

 Respondent’s Arguments

  • The Revenue, upon instructions, conceded that the petitioner’s reply had not been properly considered.
  • It was stated that the matter could be remanded for fresh consideration.

 Court’s Findings / Order

The Delhi High Court held that:

  • Since the petitioner’s reply was not considered, the order under Section 148A(d) could not be sustained.
  • The impugned order and notice dated 15 July 2022 were set aside.
  • The matter was remanded back to the Assessing Officer for fresh adjudication in accordance with law.
  • The Assessing Officer was directed to pass a fresh order within eight weeks.
  • All rights and contentions of parties were kept open.

Important Clarification

  • Proper consideration of the assessee’s reply under Section 148A(b) is mandatory before passing an order under Section 148A(d).
  • Reassessment cannot be initiated on:
    • Incorrect facts
    • Mere change of opinion
  • The judgment reinforces procedural fairness in reassessment proceedings post Union of India v. Ashish Agarwal (2022).

Sections Involved

  • Section 147 – Income Escaping Assessment
  • Section 148 – Issue of Notice for Reassessment
  • Section 148A(b) – Opportunity of Being Heard
  • Section 148A(d) – Order for Reassessment

Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/MMH28102022CW130762022_194455.pdf

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