The main legal point established in the judgment is that the AO must have a rational basis for concluding that the taxable income has escaped assessment when initiating proceedings under Section 148. Additionally, the court clarified that the provisions of Section 56(2) and 56(2)(vii)(a) should not be applied without a proper basis.

JUDGMENT

Sanjeev Narula, J. (Oral) - The present petition under Article 226 of the Constitution of India seeks quashing of the notice under Section 148 of the Income-Tax Act (hereinafter referred to as "the Act") dated 29.03.2018 for reopening of the assessment in respect of Assessment Year (hereinafter referred to as "AY") 2011-12.

2. The brief facts leading to the filing of present petition, are that the Petitioner who is a regular income tax assessee filed her return of income for the AY 2011-12 on 15.07.2011. The Assessing Officer (hereinafter referred to as "AO") vide letter dated 22.03.2018 issued under Section 133(6) of the Act, called for certain information from the assessee. The same was provided by the Petitioner on 28.03.2018, at the time of hearing. Subsequently, Respondent issued a notice dated 29.03.2018 under Section 148 of the Act, which is impugned in the present petition. In response thereto, Petitioner filed her return of income on 30.04.2018 and pursuant to a request for supply of''reasons to believe'', the AO furnished the same on 10.07.2018. Assessee''s objections to the said reasons, filed on 10.09.2018, came to be disposed of vide order dated 08.10.2018.

3. Since the scope of challenge in the instant petition pertains to the assumption of jurisdiction by the AO under Section 147 of the Act, perusal of the reasons to believe is necessary. The same are extracted herein below:

"Reasons for reopening of the assessment in case of Ms Vanita S Anand Asstt. Year 2011-12 U/s.147 of the I.T. Act 1961

1. The ITO (Inv.) Unit-7/2/2017-18/419 dated 09/03/2018 forwards the information that following transactions with M/s.Duggal Associates are appearing in the bank account NO.002901528361 of MsVanita S. Anand maintained with ICICI Bank, Greater Kailash Branch, New Delhi:

2. Ms.Vanita S. Anand submitted that she was received short term loan from Shri Anil Duggal proprietor of M/s.Duggal Associates and which was returned back.

3. Enquiries were conducted with Shri Anil Duggal in respect of above mentioned transactions, in response to queries, Shri Anil Duggal filed a reply dated 20/02/2018 confirming that he has given loan to Ms.Vanita S. Anand and the same has been including as loan and advances in his books of account.

4. Further Shri Anil Duggal filed a reply dated 01/03/2018 stating therein he he has given loan of Rs.20,12,2000/- and Rs.48,00,000/- to Ms. Vanita S. Anand @ 11% vide loan agreement dated 07/04/2010 and dated 26/04/2010 respectively.

5. On perusal of the loan agreement it was observed that the expiry of loan agreement is 15/03/2011 and on the same date loan along with interest will become due and further in the event of default the lender shall have the right to initiate legal action for the recovery of the loaned amount and interest, if any.

6. As mentioned at para-1 that Ms. Vanita S. Anand has made payment of RS.60,00,000 /- to Shri Anil Duggal on 11/08/2011against the loan taken of Rs. 70,12,000/- and interest thereupon of Rs. 7,05,320/- therefore Ms. Vanita S. Anand aggregate liability towards Shri Anil Duggal was of Rs.77, 17,320/-. Ms. Vanita S. Anand had paid only RS.60,00,000/- and remaining Rs. 17,17,320/- (i.e. Rs.77,17,320- Rs.60,00,000 = Rs. 17,17,320) remained unpaid.

7. Keeping in view the nature of transaction entered by Ms. Vanita S. Anand with Shri Anil Duggal, the provisions of section 56(2) and 56(2) (vii) (a) are reproduced as under:

Provision of section 56(2) are reproduced as under:-

Income from other sources. 56(1) income of every kind which is not to be excluded from the total income under this act shall be chargea