Safiya Malik

The Delhi High Court, Division Bench in a judgment delivered by Chief Justice Devender Kumar Upadhyay and Justice Tushar Rao Gedela, addressed procedural lapses in reassessment proceedings under the Income Tax Act, 1961. The case involved a notice issued under Section 148 based on information obtained through Section 135A. The petitioner challenged the reassessment, contending that incorrect taxpayer information was attached to the notice, which resulted in a flawed process. While the court quashed the order rejecting the petitioner’s objections, it upheld the reassessment notice subject to correction, directing the Income Tax Department to rectify the error and allow the petitioner to file fresh objections before further proceedings.

The petitioner, Monish Gajapati Raju Pusapati, received a notice dated March 23, 2024, under Section 148 of the Income Tax Act for the assessment year 2020-21. The notice was issued based on information obtained through the framework of Section 135A, which is used to identify high-risk cases for reassessment. The petitioner contested the notice, arguing that the annexed information pertained to another taxpayer, thereby making the reassessment process defective.

The petitioner submitted objections on September 13, 2024, questioning the accuracy of the reassessment basis and the procedural compliance under Section 148A. The Income Tax Department, in an order dated February 3, 2025, rejected these objections, asserting that the reassessment was lawful and that procedural safeguards under Section 148A were not required due to the exemption provided under Explanation 1(iv) to Section 148. The petitioner subsequently approached the Delhi High Court, challenging both the reassessment notice and the rejection of objections.

During the proceedings, it was revealed that the department inadvertently attached information related to another taxpayer to the notice issued under Section 148. The petitioner argued that this procedural error demonstrated a lack of due diligence, rendering the reassessment invalid. The respondents, representing the Income Tax Department, acknowledged the mistake but maintained that it was a minor, inadvertent error that did not affect the validity of the notice.

The court reviewed the records and noted that the Insight Portal of the Income Tax Department had identified a cash deposit of Rs. 22,44,647 as unverified, which formed the basis for reassessment. The court acknowledged that the tax authorities had inadvertently annexed incorrect details to the reassessment notice, leading to discrepancies.

The court stated: "It appears that while issuing the impugned notice under Section 148 of the Act, the respondents, by pure inadvertence, have annexed/attached the information pertaining to some other individual/assessee and not the petitioner. The said aspect appears to be an error or mistake and neither deliberate nor willful."

While considering whether the procedural lapse rendered the entire reassessment process void, the court examined Section 292B of the Act. This provision states that minor procedural defects do not invalidate proceedings if they conform to the substance and intent of the Act. The court held that while the issuance of the notice itself was not illegal, the rejection order dismissing the petitioner’s objections was procedurally flawed and required intervention.

Citing past judicial precedents, the court held that reassessment proceedings must adhere to procedural safeguards, even when statutory exemptions apply. The court found that the rejection of the petitioner’s objections without rectifying the erroneous annexure amounted to a failure to consider relevant materials, which necessitated quashing the rejection order dated February 3, 2025.

The respondents argued that the Bombay High Court’s ruling in Benaifer Vispi Patel vs. Income Tax Officer (2024) did not apply to the present case, as the procedural requirements differed. However, the Delhi High Court observed that the principle of procedural fairness mandates that reassessment notices must contain the correct taxpayer information, irrespective of exemptions from pre-notice inquiry requirements.

The impugned order dated February 3, 2025, rejecting the petitioner’s objections, was quashed due to procedural lapses, while the reassessment notice dated March 23, 2024, was upheld subject to correction to ensure that only the correct taxpayer information was annexed.

The Income Tax Department was directed to provide the petitioner with the correct information from the Insight Portal and the approval granted by the Specified Authority within seven days from the date of the judgment.

The petitioner was granted the opportunity to file fresh objections after receiving the correct details, and the tax authorities were instructed to consider these objections in accordance with legal provisions. The reassessment process was allowed to proceed only after rectification and reconsideration of objections, ensuring compliance with procedural requirements.

Case Title: Monish Gajapati Raju Pusapati vs. Assessment Unit Income Tax Department & Anr.
Case Number: W.P.(C) 2043/2025 & CM APPL. 9611-12/2025
Bench: Chief Justice Devendra Kumar Upadhyay and Justice Tushar Rao Gedela 

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