Divya Capital One Pvt ltd Vs ACIT Delhi(Delhi High Court)
Date-12th May 2022
Sub- Order passed u/s 148A(d) without considering the submissions- effect of. Relevance of GKN Driveshaft in the context of new law.

The delhi high court in this case was considering a WP against an order which was passed u/s 148A(d) where the preliminary notice was issued u/s 148A(b) on the pretext of escapement of income alleged to be Rs 107000 lac Crores which was basically the figure of derivatives etc transacted by the appellant share broker. The approval u/s 151 was also mechanically given. In this context, the Hon’ble Judges held that the term “information” in Explanation 1 of Section 148 cannot be resorted to lightly and it cannot give unbridled power to revenue to reopen the cases. Whether “information to suggest” under amended law or “reason to believe” under erstwhile law the benchmark of “escapement of income chargeable to tax” still remains the primary condition to be satisfied before invoking powers under Section 147 of the Act. The Court also noted that significance of issuance of a show cause notice at a stage prior to issuance of a reassessment notice under Section 148 of the Act has been lost by the department. The Court also took note that in a majority of reassessment cases post 1st April, 2021, the orders under Section 148A(d) of the Act use a template / general reason to reject the defence of the assessee on merits, namely, “found devoid of any merit because the assessee company has failed to produce the relevant documents in respect of transactions mentioned in show cause notice……..it is established that the assessee has no proper explanation……”

Thus the Court was of the opinion that a progressive as well as futuristic scheme of re-assessment whose intent is laudatory has in its implementation not only been rendered nugatory but has also had an unintended opposite result and on these facts the order passed u/s 148A(d) was quashed and set aside with liberty to pass fresh order after giving effective opportunity to the appellant.

This is one of the finest order under the amended law and more such orders will keep on coming in months to come. Probably the decisions under the earlier law will receive more approvals under the new as well.

Ramesh Patodia
19-05-2021