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IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Shakdher, Tara Vitasta Ganju, JJ.
Ornate Agencies Private Limited – Appellant
Versus
Assistant Commissioner of Income Tax Circle 19(1) New Delhi & Anr. – Respondents
W.P.(C) 3671 of 2023
Decided On : 24-03-2023
Income Tax Act - Assessment Year 2017-18 - The court allowed the writ petition seeking interim relief and disposed of the case, setting aside the order passed under Section 148A(d) of the Act and granting liberty to the Assessing Officer to pass a fresh order with a personal hearing for the petitioner's authorized representative.
Fact of the Case:
The petitioner's bank account reflected a huge credit of Rs.48,68,62,905, and the Assessing Officer had passed an order under Section 143(3) of the Income Tax Act, 1961. Subsequently, a notice was issued under Section 148A(d) of the Act, alleging that income had escaped assessment.
Finding of the Court:
The court found that the Assessing Officer had failed to quantify the income chargeable to tax and had not reached a definitive conclusion on the escaped income. As a result, the impugned order and consequent notice were set aside, and liberty was given to the Assessing Officer to pass a fresh order with a personal hearing for the petitioner's authorized representative.
Issues: The issues revolved around the alleged huge credit in the petitioner's bank account and the validity of the reassessment proceedings under the Income Tax Act.
Ratio Decidendi: The court's decision was influenced by the Assessing Officer's failure to quantify the income chargeable to tax and reach a definitive conclusion on the escaped income, leading to the setting aside of the impugned order and notice.
Final Decision: The writ petition was allowed, and the order passed under Section 148A(d) of the Income Tax Act and the consequent notice were set aside, with liberty given to the Assessing Officer to pass a fresh order with a personal hearing for the petitioner's authorized representative.
JUDGMENT
[Physical Hearing/Hybrid Hearing (as per request)]
Rajiv Shakdher, J. (Oral)
CM Appl.14241/2023
1. Allowed, subject to the just exceptions.
W.P.(C) 3671/2023 & CM Appl.14240/2023[Application filed on behalf of the petitioner seeking interim relief]
2. This writ petition concerns Assessment Year (AY) 2017-18.
3. Issue notice.
3.1. Mr Aseem Chawla, learned senior standing counsel, accepts notice on behalf of the respondents/revenue.
4. In view of the order that we intend to pass, Mr Chawla says that no counter-affidavit is required to be filed. Therefore, with the consent of the counsels for the parties, the writ petition is taken up for final hearing and disposal, at this stage itself.
5. The principal allegation against the petitioner is that a huge credit is reflected in its bank account. There is a reference to the fact that funds have been credited to its bank account amounting to Rs.48,68,62,905/-.
6. Mr Ruchesh Sinha, who appears on behalf of the petitioner, submits that the petitioner, in his reply dated 02.06.2022, has given a breakup of the aforementioned amount.
6.1. For this purpose, our attention has been made to paragraph 4 of the said reply.
| Particulars | Amount (in Rs.) | Annexure Ref. |
| Sales Proceeds received from customers during the period 9th November to 31st December 2016 which are reproduced from page no. 3 of your letter ref F No. DDIT (Inv.)/Unit-7(3)/ED/2020-21 dated 11th March 2021 which is attached with the reassessment notice dated 20th May 2022 as Annexure 1. | 19,89,30,232 | Annexure 2 |
| Internal Fund Transfers from the Company's HDFC Account No. 05032320001907 to Account No. 036911310004974 in OBC | 7,07,00,000 | Annexure 3 |
| Internal Fund transfers from the Company's CC Account No. 03694011000394 in OBC to Current Account No. 036911310004974 in OBC | 5,80,00,000 | Annexure 4 |
| Encashment of auto sweep in FDs in OBC to Current Account No. 036911310004974 in OBC | 15,92,25,000 | Annexure 5 |
| Bank interest credited to Account No. 036911310004974 in OBC on the above Sweep in FDs made during the period 9th November to 31st December 2016 | 7,673 | Annexure 6 |
| Grand Total as per your notice for Reassessment | 48,68,62,905 |
7. Furthermore, Mr Sinha says that these very aspects were considered by the Assessing Officer (AO) during scrutiny assessment and it was only thereafter, the order dated 25.12.2019 was passed under Section 143(3) of the Income Tax Act, 1961 [in short, the "Act"].
7.1. Furthermore, it is submitted by Mr Sinha that the reassessment proceedings are flawed, inter alia, for the following reasons, besides what has been indicated hereinabove i.e., that it is a case of change of opinion:
(i) The reassessment proceedings are not backed by the approval of the specified authority, as is required under Section 151(ii) of the Act.
(ii) The AO has failed to quantify the income chargeable to tax, which, according to him, has escaped assessment.
7.2. In this context, our attention is drawn to paragraph 8 of the order dated 26.07.2022 passed under Section 148A(d) of the Act. For the sake of convenience, the said paragraph is extracted hereafter:
"8. In view of the above it emerges that the income to the extent of Rs.50,00,000/- or exceeding Rs.50 lacs representing asset has escaped assessment. Hence it is a fit case for issuance of notice u/s 148."
[Emphasis is ours]
8. Clearly, there has been no application of mind by the AO. The AO has failed to reach a definitive conclusion as to what is the escaped income in the instant case. In that view of the matter, the impugned order dated 26.07.2022 passed under Section 148A(d) of the Act and consequent notice of even date i.e., 26.07.2022 are set aside.
9. Liberty is, however, given to the AO to pass a fresh order.
9.1. The AO will ensure that the personal hearing is granted to the authorized representative of the petitioner. For this purpose, the AO will issue a notice to the petitioner indicating date and time of the hearing.
10. The writ petition is disposed of in the aforesaid terms.
11. Parties w
The court emphasized the importance of ensuring that allegations made by the Assessing Officer are put to the petitioner and that the next steps are taken in accordance with the law.
Reassessment proceedings cannot be solely based on mere suspicion and must be supported by concrete evidence or material.
The central legal point established in the judgment is the requirement for actionable material and the significance of discrepancies in assessment proceedings under the Income Tax Act, 1961.
The central legal point established in the judgment is that reassessment proceedings must adhere to the specified authority's approval and the threshold requirements for escaped income under the Inco....
The central legal point established in the judgment is that the AO must have underlying material available to form a reasonable belief that income chargeable to tax has escaped assessment, and must f....
The court emphasized the importance of providing evidence, such as bank statements, to establish non-involvement in alleged transactions for reassessment proceedings under the Income Tax Act.
The court held that failure to provide complete information to the petitioner in reassessment proceedings violated due process under the Income Tax Act.
The Assessing Officer must provide adequate reasoning for reassessment actions and ensure compliance with natural justice principles.
Reassessment proceedings must be initiated with the approval of the specified authority as per Section 151 of the Income Tax Act, 1961.
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