Error in Depositing Tax not in Relevant Assessment Year: Delhi HC quashes Income Tax Notice [Read Order]

A Division Bench of the Delhi High Court quashed an income tax notice even though there was error by in depositing tax not in relevant assessment year.

A perusal of the notice issued under Section 148A(b) of the Income Tax Act, 1961 showed that the allegation made against the petitioner, Anita Arora is that the source of funds amounting to Rs.1,90,00,000/- could not be ascertained. A perusal of the very same notice also shows that this information appears to have been gleaned from the Tax Deduction at Source (TDS) statement, which adverts to consideration received on sale of the subject property.

Besides this, the notice also refers to acquisition of bonds/debentures. Insofar as the sale of property was concerned, it appears that the petitioner, admittedly, received Rs.1,55,00,000/- and invested Rs.35,00,000/- in bonds. It was in this context that the notice was issued. The record also shows that the petitioner did file a reply, wherein the details of the sale consideration received qua the subject immovable property were furnished.

The counsel for the petitioner says that the buyer of the subject property had committed an error by depositing tax for the AY in issue, i.e AY 2016-17. It was also submitted that a course correction was made when an order under Section 154 of the Income Tax Act was passed. In this context, our attention has been drawn to the order passed under Section 154 of the Income Tax Act, read with Section 143(1) of the Income Tax Act. It was also contended by learned counsel for the petitioner that, resultantly, demand for the AY 2015-16 was reduced to “nil”.

A Division Bench of the High Court of Justices Rajiv Shakdher and Girish Kathpalia observed that “Therefore, it is suggested that the impugned order be set aside, with liberty to the AO to reexamine the issue at hand. Accordingly, the impugned is set aside. Resultantly, the consequential notice will collapse. In case the AO recommences the proceedings, he will issue a fresh notice to the petitioner. The AO will also accord personal hearing to the petitioner and/or her authorized representative. In this behalf, the AO will issue a notice indicating the date and time of hearing.”

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