In a ruling that was passed recently, the Delhi High Court quashed the assessment order and held that the assessing officer ( AO ) had erroneously added value of the transaction, including the element of cash and alleged cash payment.
It was contended by the counsel for the petitioner that the assessment proceedings were initiated after three years and the income that could possibly have escaped assessment is less than the Rs. 50,00,000 threshold under Section 149(1)(b) of the Income Tax Act,1961.
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The AO issued a notice under Section 148A(b) of the Income Tax Act, 1961 alleging that the petitioner’s income for the assessment year ( AY ) 2018-19 had escaped assessment, based on information from M/s Bhagwati Developers about a residential flat purchase made by the assessee.
It was alleged that the petitioner paid ₹25,35,940/- in cash ( On Money ) beyond the declared value. The petitioner contested the notice, arguing the alleged escaped income did not exceed Rs. 50,00,000 and was time-barred under Section 149 of the Income Tax statute.
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The bench, by going through the impugned order, was of the opinion that it was erroneous and was passed without application of mind. It was also observed that the information submitted by the AO does not support the computation made by him and thus, the AO has made an error in adding the value of the transaction, which includes the element of cash and the alleged cash payment.
The High Court, comprising Justice Vibhu Bakhru and Justice Swarna Kanta Sharma, set aside the impugned notice and remanded the case back to AO to consider the matter according to the petitioner’s reply to the notice issued under Section 148A(b) of the Income Tax Act.
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