Supreme Court Affirms Delhi High Court View on Invalid Reassessment Under Section 148A

Background of the Dispute

The controversy arose from reassessment proceedings initiated against Vivo Mobile India Private Limited for Assessment Year 2018–19 under Section 148A and Section 148 of the Income Tax Act 1961. The Revenue acted on “high risk” information generated from the Insight Portal, alleging that the assessee had obtained accommodation entries in the guise of bogus capital expenditure of about ₹7.35 crore from a non-genuine concern.

The assessee approached the Delhi High Court challenging:

  • A show cause notice issued under Section 148A(b)
  • The order passed under Section 148A(d)
  • The consequent reassessment notice issued under Section 148

The High Court, after examining the material and the process followed, quashed the Section 148A(d) order and the Section 148 notice on the ground of violation of principles of natural justice, while allowing liberty to the Revenue to initiate proceedings afresh in accordance with law.

The Revenue then filed a Special Leave Petition before the Supreme Court in ACIT Vs Vivo Mobile India Private Limited, assailing the Delhi High Court’s decision.

Supreme Court’s Order in Brief

The Supreme Court:

  • First condoned the delay in filing the Special Leave Petition.
  • Examined whether there was any justification to interfere with the Delhi High Court’s judgment under Article 136 of the Constitution of India.
  • Recorded that there was no ground to invoke its discretionary jurisdiction under Article 136.
  • Consequently dismissed the Special Leave Petition and disposed of all pending applications.

As a result, the judgment of the Delhi High Court in Vivo Mobile India Private Limited Vs ACIT & Anr. (Delhi High Court) stands affirmed.

Note: The Supreme Court’s dismissal of the SLP, although brief, effectively endorses the legal principles applied by the Delhi High Court regarding the mandatory observance of natural justice in reassessment proceedings under the post-Section 148A regime.

Core Facts Before the Delhi High Court

Information Triggering Reassessment

The reassessment proceedings were triggered on the basis of risk-flag information:

  • Insight Portal data suggested that the assessee had allegedly received accommodation entries.
  • The amount involved was approximately ₹7.35 crore.
  • The entries were purportedly in the form of bogus capital expenditure from a concern alleged to be fictitious.

Assessee’s Response to Section 148A(b) Notice

Upon receiving the show cause notice under Section 148A(b), the assessee:

  1. Clarified that it had no dealings with the entity named in the notice.
  2. Informed the Revenue that the correct supplier/entity with whom it transacted was a different concern with a different name.
  3. Submitted supporting documentation to substantiate this clarification, including details of the correct entity.

Further Enquiry by the Revenue

The Revenue accepted that the entity originally referred to in the Insight information was misidentified, and then:

  • Undertook further enquiry in relation to the correctly identified entity.
  • Carried out physical verification of the address of this entity.
  • Issued summons to the said entity, which allegedly did not respond.

Based on this verification exercise, the Revenue formed a view that:

  • The corrected entity was non-existent at the given address.
  • It was effectively being used for providing accommodation entries.