Delhi HC Sets Aside Reassessment Over Cash Deposits During Demonetisation, Says Order U/S 148A(d) Income Tax Act Transgressed Notice U/S 148A(b)
The Delhi High Court has set aside the reassessment action initiated against a partnership firm under Section 148A(d) of the Income Tax Act, 1961 over cash deposits made by it during demonetisation, stating that this ground was not mentioned in the notice issued to the firm under Section 148A(b).Section 148A(b) contemplates issuance of a notice asking assessee to show cause why...
The Delhi High Court has set aside the reassessment action initiated against a partnership firm under Section 148A(d) of the Income Tax Act, 1961 over cash deposits made by it during demonetisation, stating that this ground was not mentioned in the notice issued to the firm under Section 148A(b).
Section 148A(b) contemplates issuance of a notice asking assessee to show cause why reassessment proceedings should not be initiated against it.
Notice under Section 148A(d) is issued after considering the assessee's response to the show cause notice (SCN), intimating whether or not it is a fit case to issue reassessment notice under Section 148.
Thus holding that reasons for initiating action under Section 148A(d) must be mentioned in the SCN under Section 148A(b), a division bench of Justices Vibhu Bakhru and Tushar Rao Gedela said,
“Concededly, there was no allegation in the notice issued under Section 148A(b) of the Act that the cash deposited by the Assessee in its bank account during the demonetization period was disproportionately higher in comparison with the cash deposited during the corresponding period in the previous financial year. Thus, the Assessee had no opportunity to provide any explanation in respect of such allegation.”
The Petitioner-firm is engaged in the business of operating a chain of departmental stores.
It had declared a total income of ₹26,30,730/- in respect of AY 2017-18, including ₹6,23,39,100/- deposited in the bank during the period from 09.11.2016 to 30.12.2016 [the demonetization period].
Before High Court, the Assessee submitted it had filed replies and provided details of monthly cash deposits, cash sales for the period 2016, and other relevant information. It explained that it is engaged in retail trade and operates seven departmental stores in Delhi, where more than 90% of the sales are made in cash.
High Court noted that the Assessee had explained that the cash deposited during the demonetization period was the sale proceeds of goods.
The Assessee had clarified that the source of the cash deposits was the receipts from sales made in the normal course of business and that cash sales are a routine feature of retail business.
High Court observed, “We find merit in the contention that the impugned order passed under Section 148A(d) of the Act had travelled beyond the information furnished to the Assessee, which, according to the AO, was suggestive of its income escaping the assessment. Thus, the impugned order passed under Section 148A(d) of the Act cannot be sustained and is set aside.”
It thus remanded the matter to the AO to consider the question afresh.
Appearance: For the Petitioner : Mr. Ved Jain, Mr. Nischay Kantoor, Ms. Soniya Dodeja, Mr. Divyansh Dubey and Mr. Govind Gupta, Advocates. For the Respondents : Mr. Shlok Chandra, Standing Counsel with Ms. Naincy Jain, Advocate
Case title: J. G'S Departmental Store v. Income Tax Officer Ward 60(1) & Ors.
Citation: 2025 LiveLaw (Del) 479
Case no.: W.P.(C) 13669/2024