Dhiru Realestates Private Limited Vs ITO (Delhi High Court)

The Delhi High Court recently set aside an income tax notice in the case of Dhiru Realestates Private Limited Vs ITO. The Court ruled that the Assessing Officer had made allegations that did not feature in the original notice, undermining the legitimacy of the proceedings. This case underscores the necessity of adhering to due process and factual accuracy in tax proceedings.

In the notice issued under Section 148A(b) of the Income Tax Act, 1961, the petitioner was accused of having undisclosed credit entries amounting to Rs. 7,26,63,153/-[As per enquiry report by DDIT(Inv.)]. The petitioner filed a reply to a notice dated 29.03.2023 under Section 148A(b) of the Income Tax Act, 1961, alleging that an investigation into the subject bank account revealed unexplained and undisclosed credit entries. The petitioner conceded and filed a reply, stating that the information flagged was wrong.

The Assessing Officer (AO) passed an order dated 08.04.2023 under Section 148A(d) of the Act, acknowledging the issue but making allegations that did not form part of the notice. The order revealed that the total credits in the bank account from 01.04.2018 to 31.03.2019 were Rs. 99,67,272/-, including credit by transfer of Rs. 61,04,660/- and Rs. 24,17,612/- from M/s Omkam Capital Markets Pvt. Limited and cash deposits of Rs. 14,45,000/- during the year under consideration.

The assessee failed to explain the nature of the credit received from M/s Omkam Capital Markets Pvt. Limited and the source of the cash deposited in the bank account. Additionally, an amount of Rs. 85,22,272/- was received from M/s Omkam Capital Markets Private and transferred to M/s Neelabh Spinning Mills on the same day. The assessee had not provided any documentary evidence in this regard. The ITR filed by the assesee for A.Y.2019-20 showed revenue from operation of Rs. 1,92,500/- and total cash & cash equivalent of Rs. 15,582/- only, with a nominal income of Rs. 2910/- for A.Y. 2019-20.

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 Act were not put to the petitioner. Therefore, in view of the HC, the best course of action would be to set aside the impugned order and notices, with the AO taking the next steps as per law.

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