January 2023

Reassessment Notice Change of law New procedure Show-cause notice Mandatory condition Foundational allegation in respect of share transactions missing in show-cause notice Cannot be incorporated by issuing supplementary notice

K. B. Bhujle, Advocate

68. Catchy Prop-Build Pvt. Ltd. vs. ACIT
[2022] 448 ITR 671 (Del.)
A.Y.: 2018-19
Date of order: 17th October, 2022
Sections: 147, 148, 148A(b) and 148A(d) of ITA, 1961

Reassessment Notice Change of law New procedure Show-cause notice Mandatory condition Foundational allegation in respect of share transactions missing in show-cause notice Cannot be incorporated by issuing supplementary notice.

A writ petition was filed by the assessee challenging the show-cause notice dated 16th March, 2022 issued u/s 148A(b) of the Income- tax Act, 1961, the order passed u/s 148A(d) and the notice issued u/s 148 (both dated 31st March, 2022) for A.Y. 2018-19 on the grounds that the show-cause notice had been issued in violation of the provisions of section 148A(b), since it merely mentioned the transaction entered into by the assessee of purchase and sale of shares undertaken by it but did not contain any allegation of escapement of income for A.Y. 2018-19. The Delhi High Court allowed the writ petition and held as under:

i) In the notice issued u/s. 148A(b), the assessee was never asked to explain the source of funds that were used by the entity that had amalgamated with the assessee to purchase the shares of another entity. The show-cause notice issued under section 148A(b), the order passed u/s. 148A(d) and the notice issued u/s. 148 for the A.Y. 2018-19 were quashed.

ii) If the foundational allegation was missing in the show-cause notice issued u/s. 148A(b), it could not be incorporated by issuing a supplementary notice.

iii) However, if the law permitted, the Department was at liberty or take further steps in the matter. If and when such steps were taken and if the assessee had a grievance it was at liberty to seek remedies in accordance with law.

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