Facts of the Case

The petitioner, Subodh Kant Sahay (HUF), challenged the reassessment proceedings initiated for the relevant assessment year pursuant to a notice issued under Section 148A(b) of the Income-tax Act, 1961, followed by an order passed under Section 148A(d) and a consequential notice under Section 148. The reassessment proceedings were initiated on the basis of alleged information suggesting escapement of income.

The petitioner submitted a detailed reply to the show cause notice explaining that there was no escapement of income and that the alleged information relied upon by the Assessing Officer did not pertain to the petitioner or did not disclose any taxable income. Despite the detailed reply, the Assessing Officer proceeded to pass the order under Section 148A(d) without dealing with the explanation furnished.

Issues Involved

Whether the reassessment proceedings were validly initiated in the absence of recording and satisfaction of jurisdictional facts, whether the order under Section 148A(d) suffered from non-application of mind, and whether the consequential notice under Section 148 could be sustained in law.

Petitioner’s Arguments

The petitioner contended that the mandatory procedure prescribed under Section 148A was not followed. It was argued that the show cause notice was vague and did not disclose the material forming the basis of the belief of escapement of income. The petitioner further submitted that the order under Section 148A(d) was a non-speaking order, as it failed to consider or deal with the detailed reply filed, thereby violating principles of natural justice.

Respondent’s Arguments

The Revenue submitted that the reassessment proceedings were initiated based on information available with the Department indicating escapement of income and that the Assessing Officer was justified in issuing the notice and passing the order under Section 148A(d).

Court Order / Findings

The Delhi High Court examined the impugned order passed under Section 148A(d) and observed that it did not record any reasons demonstrating application of mind to the petitioner’s reply. The Court held that mere reproduction of allegations or reference to information without analysing the assessee’s explanation does not satisfy the statutory requirement under Section 148A(d).

The Court reiterated that assumption of jurisdiction for reassessment is conditional upon strict compliance with the procedural safeguards under Section 148A, including disclosure of material relied upon and passing of a reasoned order. In the absence of such compliance, the reassessment proceedings are vitiated.

Important Clarification

The Court clarified that Section 148A is not an empty formality. The Assessing Officer must objectively examine the assessee’s reply and record clear reasons indicating escapement of income before assuming jurisdiction under Section 148. Failure to do so renders the proceedings without jurisdiction.

Final Outcome

The writ petition was allowed. The Delhi High Court set aside the order passed under Section 148A(d) and the consequential notice issued under Section 148, holding that the reassessment proceedings were initiated without proper satisfaction of jurisdictional facts and in violation of principles of natural justice. The petition was disposed of accordingly.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769503965_SUBODHKANTSAHAYHUFVsINCOMETAXOFFICERWARD281DELHIANR..pdf

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