The Delhi High Court recently comprising of a bench of Justice Manmohan and Justice Manmeet Pritam Singh Arora quashed the show-cause notice and the reassessment order as the department failed to pass the reassessment order within the prescribed time limit. (Nagesh Trading Co. Versus Income Tax Officer)
Facts of the case
The Present writ petition was filed challenging the show cause notice dated 2nd June, 2022 issued under Section 148A(b) of the Income Tax Act, 1961 as well as the order passed under Section 148A(d) of the Act and the notice issued under Section 148 of the Act, both dated 28th July, 2022 for the Assessment Year 2017-18.
Contention of the Parties
Learned counsel for the Petitioner stated that pursuant to the directions of the Supreme Court in Union of India vs. Ashish Agarwal, 2022 SCC OnLine SC 543, the Petitioner was issued a letter dated 2nd June, 2022 under Section 148A(b) of the Act alleging that the Petitioner is a beneficiary of accommodation entries provided by the entities controlled by Mr.Ashok Kumar Gupta and has booked non-genuine bogus sales in their books of accounts to the tune of Rs.3,02,00,636/-.
He stated that the Petitioner had filed a reply dated 4th June, 2022, wherein it was submitted that the impugned show cause notice dated 2nd June, 2022 under Section 148A(b) of the Act had been wrongly issued to the Petitioner as the initial notice under the unamended Section 148 of the Act was issued to the Petitioner on 31st March, 2021 and served vide email on the same date.
He stated that the Petitioner had duly participated in the re-assessment proceedings initiated vide notice dated 31st March, 2021 issued under Section 148 of the Act by filing its return of income and replying to all the notices issued under Section 142(1) of the Act.
He stated that the Respondent failed to pass the re-assessment order within the prescribed time limit that ended on 31st March, 2022. He further states that the Respondent, without taking into consideration the fact that the limitation for completing the re-assessment proceedings pursuant to the notice issued under Section 148 of the Act had already elapsed subsequently issued the impugned show cause notice dated - 2 nd June, 2022 under Section 148A(b) of the Act.
The counsel for the Respondent-Revenue, on the last date of hearing had handed over a copy of a letter dated 04th October, 2022 written to him by the Income Tax Officer, Ward-47(1), New Delhi.
In rejoinder, learned counsel for the Petitioner stated that the facts stated in the letter dated 04th October, 2022 are not correct inasmuch as the three writ petitions do not pertain to the assessment year in question.
Courts Observation and Judgment
The bench taking note of the facts of the case and contention of the parties remarked, "Having heard learned counsel for the parties, this Court is of the view that the Respondent having issued and served the impugned notice on 31st March, 2021 under Section 148 of the unamended Act, could not have issued another notice under Section 148A(b) of the Act dated 2nd June, 2022 to the Petitioner. 6. Further the directions given by the Supreme Court in Ashish Agarwal (supra) were applicable to cases, where notices under Section 148 of the Act had been issued during the period 01st April, 2021 to 30th June, 2021 – which is not the case in the present matter."
The bench disposing of the petition remarked, "Consequently, the show cause notice dated 2nd June, 2022 as well as the order passed under Section 148A(d) of the Act and the notice issued under Section 148 of the Act, both dated 28th July, 2022, for the Assessment Year 2017-18 are quashed.
However, this Court clarifies that it has not dealt with the legality and validity of the proceedings initiated vide show cause notice dated 31st March, 2021 issued under Section 148 of the unamended Act.
Further, if the law permits the Respondent-Revenue to take further steps in the matter, they shall be at liberty to do so. Needless to state that if and when such steps are taken and if the Petitioner has a grievance, it shall be at liberty to take its remedies in accordance with law. With the aforesaid directions and liberty, the present writ petition stands disposed of."
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