The Delhi High Court set aside income tax notice as allegations of undisclosed income did not form the part of income tax notice.
The petitioner in the present matter is Dhiru Real Estates Private Limited. The writ petition concerns Assessment Year (AY) 2019-20.
The principal allegation levelled against the petitioner in the notice issued under Section 148A(b) of the Income Tax Act, 1961, is that investigation carried out qua the subject bank account had revealed that it registered credit entries to the tune of Rs. 7,26,63,153/-; which remained unexplained and undisclosed. In response to the said notice, the petitioner, concededly, filed a reply and took the stand that the information flagged was wrong.
The Assessing Officer (AO), while passing the order under Section 148A(d) of the Income Tax Act, acknowledges this aspect of the matter. However, from that point, the AO proceeds to make allegations which did not form part of the notice issued under Section 148A(b) of the Income Tax Act.
Under section 148A of the Income Tax Act the Assessing Officer must give the person being taxed more than seven days but less than thirty days to explain. The response from the taxpayer will help the income tax officer decide whether or not to send a notice for unreported income. A copy of the ruling and a notification must be sent to the taxpayer if the income tax officer chooses to reopen the matter. Discrepancies in the assessment of taxable income are disclosed in the notification.
A Division Bench of the High Court comprising Justices Rajiv Shakdher and Girish Kathpalia observed that “Based upon the aforesaid, the AO concluded that Rs.99,67,272/-, which was otherwise income assessable to tax, had escaped assessment. Undoubtedly, the aspects recorded in the order passed under Section 148A(d) of the Income Tax Act were not put to the petitioner. Therefore, in our view, the best way forward would be to set aside the impugned order and notices, with liberty to the AO to take the next steps in the matter, albeit, as per law.”
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