The Delhi High Court has annulled the reassessment proceedings initiated against a partnership firm under Section 148A(d) of the Income Tax Act, 1961 concerning cash deposits made during the demonetisation period. The Court highlighted that the reasoning for this action was not included in the notice served to the firm under Section 148A(b).
Section 148A(b) requires the issuance of a notice which calls upon the assessee to explain why reassessment should not be pursued.
Conversely, a notice under Section 148A(d) is issued only after reviewing the assessee’s response to the show cause notice (SCN), indicating whether it is appropriate to issue a reassessment notice under Section 148.
The division bench comprising Justices Vibhu Bakhru and Tushar Rao Gedela emphasized that the rationale for initiating action under Section 148A(d) must be articulated in the SCN given under Section 148A(b).
The petitioner firm, noted for operating a network of departmental stores, declared an income of ₹26,30,730/- for the assessment year 2017-18, which included ₹6,23,39,100/- deposited in the bank during the demonetisation period from November 9, 2016, to December 30, 2016.
Read more at: Incorrect information- Non- application of mind by Assessing Officer Notice u/s. 148A(b) as well order u/s. 148A(d) bad in law
In its submission to the High Court, the assessee detailed its replies, including monthly cash deposits and cash sales for 2016, asserting that over 90% of sales were conducted in cash via seven retail outlets in Delhi.
The High Court acknowledged the firm’s explanation that cash deposits during demonetisation were derived from sales proceeds. The assessee clarified that these deposits came from regular sales transactions and that cash sales were standard in the retail industry.
The Court remarked, “We see validity in the assertion that the challenged order under Section 148A(d) of the Act exceeded the purview of the information provided by the assessee, which, according to the Assessing Officer, indicated its income was eluding assessment. Therefore, the order under Section 148A(d) of the Act is untenable and is hereby revoked.”
The matter has been referred back to the Assessing Officer for re-evaluation.
Representation:
- 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, along with Ms. Naincy Jain, Advocate.
Case Title: J. G’S Departmental Store v. Income Tax Officer Ward 60(1) & Ors.
Case No.: W.P.(C) 13669/2024
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