Reassessment Struck Down: HC Quashes Section 148 Notice Issued on Unverified Information

The petitioner challenged a notice dated 31.03.2022 issued under Section 148 of the Income-tax Act, 1961, along with the order passed under Section 148A(d) of the same date, seeking to reopen assessment for A.Y. 2018-19. The reopening was premised on information allegedly received from “credible sources” suggesting that the petitioner had availed accommodation entries amounting to Rs. 18,79,56,626 from various entities, including RCI Industries and Technologies Limited, without actual supply of goods, thereby claiming fake input tax credit.

The Court repeatedly called upon the Revenue to produce any incriminating or tangible material substantiating the alleged transactions. Despite perusal of the original file, no evidence was shown establishing even a single transaction between the petitioner and the alleged entities.

Issue before Court: Whether reassessment proceedings initiated under Sections 148A(b) and 148, based solely on unverified and unreliable information without any tangible material, are legally sustainable.

HC’s Order: The High Court allowed the writ petition and quashed the impugned order passed under Section 148A(d) as well as the notice issued under Section 148 of the Act. The Court held that the Assessing Officer had resorted to reopening proceedings without verification of the information and without any evidence worth the name to establish the alleged accommodation entries.

The Revenue failed to point out any material connecting the petitioner with RCI Industries and Technologies Limited or any other entity. The Court concluded that initiation of reassessment based on absolutely unreliable information violates the statutory safeguards under Section 148A and cannot be sustained in law.

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