Facts of the Case

The petitioner, Ferra Engineering Pty Limited, is a non-resident company incorporated in Australia. For Assessment Year 2020-21, the petitioner transferred its equity shares in Ferra Aero Space Pvt. Ltd. to Ferra U.K. for a consideration of ₹7,43,27,348. Apart from this share transfer, the petitioner did not undertake any other activity in India during the relevant financial year. The Assessing Officer issued a notice dated 29.03.2025 under Section 148A(1) on the basis of information from risk management strategy indicating a financial transaction of ₹7,43,27,348 and the absence of a return for the said assessment year. The petitioner filed detailed replies on 06.06.2025 and 28.06.2025 explaining that the transaction pertained to transfer of shares and furnished a computation showing long-term capital loss of ₹1,03,33,852 and short-term capital gain of ₹39,49,342, asserting that income chargeable to tax did not exceed ₹50 lakhs. Despite the replies, the Assessing Officer passed an order under Section 148A(3) and issued a notice under Section 148 dated 30.06.2025, leading the petitioner to approach the High Court.

Issues Involved

Whether the order passed under Section 148A(3) and the consequent notice under Section 148 were sustainable when the petitioner had furnished replies and computation explaining the transaction, whether adequate opportunity and consideration of documents were granted, and whether the matter warranted remand for fresh consideration.

Petitioner’s Arguments

The petitioner contended that the Assessing Officer failed to consider the replies and computations submitted, mechanically reiterating that the transaction of ₹7,43,27,348 required examination. It was argued that the notice and order did not demonstrate that income exceeding ₹50 lakhs had escaped assessment so as to attract Section 149(1)(b). It was further submitted that certain documents, such as TRC and bank statements, were not specifically called for earlier, and the petitioner was willing to furnish the same if an opportunity was granted.

Respondent’s Arguments

The Revenue justified issuance of the notice on the ground that the petitioner was a non-filer and the only information available was the transaction amount. It was contended that in the absence of supporting documents like share purchase agreement, bank statements and reconciliation, reassessment was warranted to examine the taxability of the transaction.

Court Order / Findings

The Delhi High Court recorded the petitioner’s statement that it would not press the plea regarding the legality of the Section 148A(1) notice or the limitation issue under Section 148A(3), and expressed readiness to submit TRC, full bank statements and reconciliation of foreign exchange and costs. Taking these submissions on record, the Court set aside the order passed under Section 148A(3) and the notice issued under Section 148 dated 30.06.2025. The Court remanded the matter to the Assessing Officer for fresh consideration of the petitioner’s replies and documents. The Assessing Officer was directed to call for such further documents as deemed appropriate, grant prior notice with sufficient time, and thereafter pass a reasoned and speaking order within an outer limit of twelve weeks.

Important Clarification

The High Court clarified that reassessment proceedings must reflect due consideration of the assessee’s replies and supporting material. Where the assessee undertakes to furnish additional documents, principles of natural justice require the authority to reconsider the matter afresh and pass a reasoned order within a stipulated timeframe.

Final Outcome

The writ petition was disposed of. The order under Section 148A(3) and the notice under Section 148 dated 30.06.2025 were set aside, and the matter was remanded to the Assessing Officer for fresh consideration in accordance with law, with a direction to pass a reasoned and speaking order within twelve weeks after granting adequate opportunity to the petitioner.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769502344_FERRAENGINEERINGPTYLIMITEDVsASSISTANTCOMMISSIONEROFINCOMETAXCIRCLEINTERNATIONALTAXATION131DELHI.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.