Department Failed To Pass Re-Assessment Order Within Prescribed Time Limit: Delhi High Court

The Delhi High Court has quashed the show-cause notice and the reassessment order as the department failed to pass the reassessment order within the prescribed time limit.

The division bench of Justice Manmohan and Justice Manmeet Pritam Singh Arora observed that the department could not have issued another notice to the petitioner/assessee under Section 148A(b) dated June 2, 2022, after having issued and served the notice on March 31, 2021, under Section 148 of the unamended Act.

The court noted that the directions given by the Supreme Court in the case of Ashish Agarwal were applicable to cases where notices under Section 148 had been issued during the period from 1st April 2021 to 30th June 2021. However, the decision was not applicable to the facts of the present case.

The petitioner was issued a letter dated 2nd June 2022 under Section 148A(b) of the Income Tax Act alleging that the petitioner is a beneficiary of accommodation entries provided by the entities controlled by Mr Ashok Kumar Gupta. The petitioner was alleged to have undertaken non-genuine bogus sales in their books of accounts to the tune of Rs.3,02,00,636.

The petitioner had filed a reply dated June 4, 2022. The petitioner claimed that the show causes notice dated June 2, 2022, issued under Section 148A(b) was issued in error because the initial notice under the unamended Section 148 of the Act was issued to the petitioner on March 31, 2021, and served via email on the same date.

The petitioner contended that it had duly participated in the reassessment proceedings initiated vide notice dated March 31, 2021, issued under Section 148 by filing its return of income and replying to all the notices issued under Section 142(1).

The petitioner contended that the department failed to pass the re-assessment order within the prescribed time limit that ended on March 31st, 2022. The respondent then issued the show cause notice dated June 2, 2022, under Section 148A(b), despite the fact that the deadline for completing the reassessment proceedings under the notice issued under Section 148 had already passed.

For the Assessment Year 2017-18, the court quashed the show cause notice dated June 2, 2022, as well as the order issued under Section 148A(d) and the notice issued under Section 148, both dated July 28, 2022.

The court clarified that it has not dealt with the legality and validity of the proceedings initiated vide show cause notice dated March 31st, 2021, issued under Section 148 of the unamended Act.

Case Title: Nagesh Trading Co. Versus Income Tax Officer

Citation: 2022 LiveLaw (Del) 967

Date: 12.10.2022

Counsel For Petitioner: Advocates Salil Kapoor, Sumit Lalchandani, Vibhu Jain

Counsel For Respondent: Sr.Standing Counsel Abhishek Maratha

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