Manjeet Kaur Duggal Vs ITO (Delhi High Court)
Delhi High Court, in a significant ruling, has set aside a reassessment notice issued by the Income Tax Department, holding that an Assessing Officer (AO) cannot rely on mere assumptions to determine that income escaping assessment exceeds the statutory threshold of ₹50 lakh required for reopening cases beyond three years. The court emphasized that the quantum of escaped income must be based on the information and material on record, not on conjecture.
The judgment was delivered in a petition filed by Manjeet Kaur Duggal challenging a notice issued under Section 148 of the Income Tax Act, 1961, for the Assessment Year (AY) 2013-14. The proceedings were initiated based on information that the assessee had booked bogus Long-Term Capital Gains (LTCG) amounting to ₹52.24 lakh from the sale of “penny stocks.”
Background of the Case
The Income Tax Department issued a notice to Duggal on April 6, 2021, which, following the Supreme Court’s directions in the case of Union of India & Ors. v. Ashish Agarwal (2022), was treated as a show-cause notice under Section 148A(b) of the Act. The department alleged that the assessee had earned fictitious LTCG of ₹52,24,250 from trading in the shares of M/s Gemstone Investment Limited and M/s Priti Mercantile Private Limited.
