Facts of the Case

The petitioner, Harshit Finvest Pvt. Ltd., a Non-Banking Financial Company registered with the Reserve Bank of India, challenged the order dated 30.06.2025 passed under Section 148A(3) of the Income-tax Act, 1961 and the consequential notice issued under Section 148 for Assessment Year 2021–22. The petitioner’s return for the relevant year had earlier been processed under Section 143(1). Reassessment proceedings were initiated on the basis of information received from the Investigation Wing alleging escapement of income amounting to ₹6.75 crores, purportedly linked to accommodation entry transactions routed through M/s ITJ Retails Pvt. Ltd. and M/s Ashutosh Traders.

Issues Involved

Whether the High Court should interfere with reassessment proceedings at the stage of Section 148A where the Assessing Officer has passed a speaking order, whether there was independent application of mind or merely borrowed satisfaction from investigation reports, and whether the alleged escapement of income was supported by tangible material justifying issuance of notice under Section 148.

Petitioner’s Arguments

The petitioner contended that it had no direct or indirect dealings with M/s Ashutosh Traders and that its transactions with M/s ITJ Retails Pvt. Ltd. were purely financial in nature and duly reflected in audited accounts and bank statements. It was argued that the Investigation Wing report contained factual inaccuracies and that the alleged escapement of ₹6.75 crores was disproportionate to the alleged entry of ₹18.92 lakhs. The petitioner further submitted that sanction under Section 151 was accorded mechanically and that selective action against the petitioner, without initiating proceedings against M/s ITJ Retails Pvt. Ltd., rendered the reassessment proceedings arbitrary and violative of Article 14 of the Constitution.

Respondent’s Arguments

The Revenue submitted that the order passed under Section 148A(3) was a detailed and reasoned order dealing with each contention raised by the petitioner. It was argued that independent verification was conducted by issuance of notice under Section 133(6) to M/s ITJ Retails Pvt. Ltd., pursuant to which bank statements were obtained revealing transactions with M/s Ashutosh Traders, thereby corroborating the Investigation Wing inputs. The Revenue contended that the reassessment proceedings were based on credible material and involved disputed questions of fact which could not be adjudicated in writ jurisdiction.

Court Order / Findings

The Delhi High Court examined the impugned order passed under Section 148A(3) and noted that the Assessing Officer had undertaken extensive independent verification, including issuance of notice under Section 133(6), examination of bank statements, and comparative analysis of conflicting statements. The Court held that the order was a speaking order demonstrating independent application of mind and could not be characterised as being based on borrowed satisfaction. Relying on the Supreme Court judgment in Principal Director of Income Tax (Investigation) vs. Laljibhai Kanjibhai Mandalia, the Court reiterated that at the stage of reassessment initiation, the sufficiency or adequacy of reasons cannot be examined in writ proceedings, and judicial review is limited to examining existence of jurisdictional facts.

Important Clarification

The Court clarified that at the stage of issuance of notice under Section 148, the Assessing Officer is only required to form a prima facie belief regarding escapement of income based on tangible material, and not to conclusively establish such escapement. All contentions on merits were left open to be urged by the petitioner during reassessment proceedings.

Final Outcome

The writ petition was dismissed. The order dated 30.06.2025 passed under Section 148A(3) of the Income-tax Act, 1961 and the consequential notice issued under Section 148 for Assessment Year 2021–22 were upheld, with liberty to the petitioner to raise all permissible pleas before the Assessing Officer during reassessment proceedings.

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769502649_HARSHITFINVESTPVTLTDVsASSISTANTCOMMISSIONEROFINCOMETAXCIRCLE101NEWDELHIANR..pdf 

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