Absence Of Formal Communication U/S 148A Of Income Tax Act Not Fatal When Opportunity To Question Reassessment Had Been Provided: Delhi HC

The Delhi High Court observed that absence of a formal notice under Section 148A of the Income Tax Act, 1961 was not fatal to reassessment proceedings initiated in the twilight zone when the inquiry provisions were introduced by the Finance Act, 2021. A division bench of Justices Yashwant Varma and Dharmesh Sharma noted that the Department had provided an opportunity to the petitioner-assessee to question the assumption of jurisdiction under Section 148, which was the “underlying principle” of Section 148A. It thus observed, “in our considered opinion the respondents had substantially complied with the principles underlying Section 148A(b) and (d) by providing an opportunity to the petitioner to question the assumption of jurisdiction under Section 148. We are thus of the firm opinion that, notwithstanding a formal communication having not been addressed to the petitioner of the 09 April 2021 notice being liable to be treated as one under Section 148A(b), the impugned notice and the consequential proceedings are not liable to be faulted on this score.” In the case at hand, the Petitioner had questioned the reassessment proceedings basis the digital signing of the notice under Section 148 on 09 April 2021, although it bore a date of 31 March 2021. Petitioner contended that since the notice was digitally signed on 09 April 2021, when the reassessment regime as introduced by virtue of Finance Act, 2021 became applicable, the respondents had to follow the procedure prescribed by Section 148A. The Department on the other hand contended that it was not obligated to either follow the Section 148A route or undertake a course correction pursuant to the judgment rendered by the Supreme Court in Union of India and Ors. vs. Ashish Agarwal (2023). The Top Court had ruled that all notices issued pan India after 01 April 2021, albeit in accordance with the procedure contemplated under the earlier regime of reassessment, would be deemed to be notices referable to Section 148A(b) and the procedure as prescribed in that provision being thereafter liable to be followed. The High Court agreed that the Department failed to clarify that the notice originally issued on 09 April 2021 should be treated as being one referable to Section 148A(b) of the Act. However, it also noted that the Department did adhere to the procedure formulated by the Supreme Court in GKN Driveshafts (India) Ltd. v. Income Tax Officer and Ors. (2003), by virtue of which the Department was bound to communicate the reasons for formation of opinion of income having allegedly escaped assessment to the assessee and providing him an opportunity to object to the commencement of a reassessment action. This procedure finds resonance in clauses (b) and (d) of Section 148A of the Act. Accordingly, the High Court observed that the Department had complied with the underlying principles of Section 148A and the reassessment proceedings cannot be invalidated for absence of a formal notice. Nonetheless, the petition was allowed and reassessment proceedings were set aside for not complying with the threshold prescribed under Section 149 of the Act. Appearance: Mr. Salil Aggarwal, Sr. Adv. with Mr. Mahir Aggarwal, Mr. Uma Shankar and Mr. Madhur Aggarwal, Advs for Petitioner; Mr. Debesh Panda, SSC with Ms. Zehra Khan, JSC, Mr. Vikramaditya Singh, Mr. Kanishk Aggarwal, Ms. Anauntta Shankar and Mr. Ruchir Joshi, Advs for Respondent Case title: Rohit Kumar v. Income Tax Officer Ward 54 (1), DelhiCitation: 2025 LiveLaw (Del) 45 Case no.: W.P.(C) 2830/2022Click Here To Read/Download The Order

Absence Of Formal Communication U/S 148A Of Income Tax Act Not Fatal When Opportunity To Question Reassessment Had Been Provided: Delhi HC

Kapil Dhyani

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