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Upholds Reassessment Against , Directs Personal Hearing
on , upheld the reassessment proceedings initiated against for Assessment Year (AY) 2019-20, while directing the Assessing Officer to provide the company a meaningful opportunity of personal hearing during the reassessment stage.
The judgment, delivered by Justice Smita Das De , dismissed the company's challenge to the order under , and the consequential notice under Section 148, which alleged escapement of income to the tune of Rs. 3.13 crore .
Case Background
The dispute arose from a show-cause notice issued on , under Section 148A(1), based on information from the tax department's insight portal regarding alleged income escapement. The Assessing Officer identified two components: Rs. 1.68 crore received as an unsecured loan and Rs. 1.45 crore in unexplained cash deposits. Despite the company submitting a detailed reply on , specifically requesting a personal hearing, the Assessing Officer passed a on , under Section 148A(3) and issued the reassessment notice.
Chirania Projects argued that the Assessing Officer had travelled beyond the show-cause notice by introducing the cash deposit amount only in the final order, and that the failure to grant a personal hearing violated . The company maintained that the loan was received through proper banking channels and that it had submitted sufficient documentary evidence to establish the lender's identity, creditworthiness, and the genuineness of the transaction.
Arguments Presented
Petitioner's submissions:
Lead counsel
argued that the Assessing Officer failed to adhere to mandatory under Section 148A. He contended that the officer formed a "" by relying solely on information from the insight portal without forming an independent opinion, as held in
Nimesh Maheshbhai Shah (Huf) v. Income Tax Officer
(). Further, relying on
Nitin Agarwal v. Income Tax Officer
() and an order in
, the petitioner asserted that denial of a personal hearing at the Section 148A stage vitiated the proceedings.
Respondent's reply:
, appearing for the Revenue, submitted that the impugned order was a reasoned and passed in strict conformity with Section 148A. He argued that a personal hearing at the preliminary stage was not mandatory, and the substantive opportunity would be provided during the reassessment proceedings under Section 148 read with Section 147.
Court's Legal Analysis
Justice Das De examined each contention and concluded that the Assessing Officer had complied with the mandatory procedure. The court observed that the show-cause notice had been issued, the company's reply was considered, and a was passed. Critically, the court noted:
"The mere fact that an oral hearing has not been granted at this preliminary stage does not vitiate the proceedings, especially when a full-fledged opportunity of hearing is contemplated during the reassessment."
On the issue of traveling beyond the show-cause notice, the court found that both the loan and cash deposit amounts were "intrinsically linked" to the information regarding escapement of income and had been considered collectively. The court emphasized:
"At the stage of Section 148A (3), the Assessing Officer is only required to form a . The deeper scrutiny of documents regarding genuineness of loan is a matter to be undertaken during the reassessment proceedings under Section 148 read with Section 147."
The court distinguished the precedents cited by the petitioner, noting that they did not establish an absolute right to personal hearing at the Section 148A stage. It reaffirmed:
"It is a well settled proposition that personal hearing at 148A (3) stage is not an absolute right. must be given during reassessment."
Key Observations from the Judgment
-
"The Assessing Officer has complied with the mandatory procedure under Section 148A. The show cause notice has been issued, reply has been invited and a has been passed disposing of the objection."
-
"At the stage of Section 148A (3), the Assessing Officer is only required to form a . The deeper scrutiny of documents regarding genuineness of loan is a matter to be undertaken during the reassessment proceedings under Section 148 read with Section 147."
-
"…the interest of justice would be met by directing the Assessing Officer to afford a to the petitioner during the course of reassessment proceedings, to enable them to rebut the allegations and produce further evidence in support of their case."
Court's Decision and Implications
Justice Smita Das De disposed of the writ petition with the following directions:
- The order dated 30.06.2025 under Section 148A(3) and the consequential notice under Section 148 were upheld .
- The Assessing Officer was directed to proceed with reassessment for AY 2019-20 in accordance with law.
- The Assessing Officer was mandated to afford a proper opportunity of personal hearing to the petitioner and consider all documents and explanations furnished.
- All contentions on merits were left open to be agitated before the Assessing Officer.
The ruling clarifies that while the under Section 148A must be followed, the absence of a personal hearing at that stage does not automatically invalidate reassessment proceedings. The substantive right to be heard is preserved at the reassessment stage. This decision provides guidance to tax authorities and assesses alike on the scope of Section 148A and the importance of balancing procedural efficiency with natural justice.
