Shell Entities Purchase: Section 148A(d) order dismissed for Violation of Natural Justice

The appeal in question was filed against the order passed by the learned Single Bench, which dismissed the writ petition challenging the order of the respondent under Section 148A(d) of the Income Tax Act. The grounds for dismissal were based on the violation of principles of natural justice. However, the learned Writ Court declined to interfere with the order, stating that the appellant could raise all issues during the re-assessment proceedings.

Upon examining the show cause notice issued by the Assessing Officer, it is revealed that the allegation against the appellant/assessee pertained to the alleged purchase from shell entities, Baliram Sharma and M/s. D.S. Bitumix, along with other spurious relevant expenses. The appellant responded within the stipulated date and provided income tax returns and supporting documents.

It is important to note that the assessee was not granted a personal hearing, and the order passed under Section 148A(d) referred to transactions involving M/s. Devyansh Dealcom Private Limited and M/s. Eastern Sales India. However, these companies were not mentioned in the show cause notice concerning the appellant/assessee. Additionally, the hearing was not scheduled for March 29, 2022, as mentioned in the show cause notice. This discrepancy is attributed to an error by the Assessing Officer. The Assessing Officer claimed that the assessee did not submit supporting documents, which contradicts the enclosures submitted by the assessee along with the response on March 29, 2022.

Based on these findings, the court concluded that there had been a violation of principles of natural justice and remanded the matter back to the Assessing Officer for a fresh decision.

The Assessing Officer was directed to provide all relevant information regarding the two companies mentioned and grant the assessee 15 days to submit a short additional response. Furthermore, a personal hearing was to be scheduled, and a fresh order was to be passed on merits and in accordance with the law.