Income Tax Reassessment Notices issued for Share Transfer: Delhi HC Sets Aside Notices, Remands for Fresh Consideration [Read Order]

The High Court of Delhi, sets aside notices issued under Sections 148A(1), 148A(3), and 148 of the Income Tax Act,1961, for the transfer of shares by a non-resident company and remands the matter to the Assessing Officer (AO) for fresh consideration.

FERRA Engineering Pty Limited,petitioner-assessee, through its counsel, submitted that it was a non-resident company incorporated in Australia and, during Assessment Year 2020-21, transferred its equity shares in Ferra Aero Space Pvt. Ltd. to Ferra U.K. for ₹7,43,27,348/-. Apart from this transaction, the petitioner did not carry out any other activity in India during the year.

The counsel stated that the AO issued a notice under Section 148A(1), alleging that the taxability of the transaction remained unexplained and that income might have escaped assessment.

The petitioner filed detailed replies on 06.06.2025 and 28.06.2025, explaining the share transfer and submitting computations showing a long-term capital loss of ₹1,03,33,852/- and a short-term capital gain of ₹39,49,342/-, in accordance with the Act. This demonstrated that the income from the transaction did not exceed ₹50 lakh, making Section 149(1)(b) inapplicable.

The counsel argued that the order under Section 148A(3) ignored the documents submitted and merely reiterated the need to examine the transaction, perpetuating the illegality in the original notice.

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He further contended that the AO should have first established that the escaped income exceeded ₹50 lakh before issuing the notice and that the claim regarding non-submission of the share purchase agreement, TRC, and bank statements was incorrect, as these were never requested.

In support, the counsel relied on BBC World News v. Assistant Director of Income Tax (2014), Nitin Nema v. Principal Chief Commissioner of Income Tax (2023), and Sanat Kumar Murli v. ITO (2023) and Sanat Kumar Murli v. Income Tax Officer (2025) .

The respondent counsel submitted that the notice and the order under Section 148A(3) were justified. He stated that the petitioner, being a non-filer, had only provided information about the sale of shares worth ₹7,43,27,348/-, and the Assessing Officer issued the notice based on that transaction.

He added that, since the petitioner did not submit key documents like the share purchase agreement, bank statements, and a reconciliation of foreign exchange and costs, the AO had to examine the taxability of the transaction in detail, which required reassessment.

The petitioner counsel submitted that the court could remand the matter to the Assessing Officer for fresh consideration of the petitioner’s reply without ruling on the legality of the notice under Section 148A(1). He stated that the petitioner was ready to submit the TRC, complete bank statements, and full reconciliation of foreign exchange and costs, and noted that the share purchase agreement had not been executed.

Justice V Rameshwar Rao and Justice Vinod Kumar recorded the petitioner counsel’s submission that the petitioner would not challenge the limitation of the order under Section 148A(3) or the legality of the notice under Section 148A(1). It set aside the order and notice dated 30.06.2025 and remanded the matter to the AO for fresh consideration.

The AO was directed to consider the documents submitted by the petitioner, along with any other documents or replies he deemed necessary, after giving prior notice. He was required to pass a reasoned and speaking order within 12 weeks. The petition was disposed of, and the pending application was dismissed as infructuous.

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