Reopening order under Section 147 quashed for lack of actionable material regarding undisclosed bank deposits

The Delhi HC set aside the reopening order under Section 147 concerning undisclosed bank deposits. The petitioner denied ownership of HDFC Bank and DCB Bank accounts identified by the AO for FY 2014-15, providing statements from his actual accounts with ICICI Bank and Jammu Kashmir Bank. The AO proceeded without actionable material to reopen a closed assessment. Despite making no additions to declared income, a demand notice was issued. The CIT(A) order compounded revenue's problems as the AO failed to present his stance during proceedings. The court ruled in favor of the assessee.

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Issues Involved:
1. Validity of the order dated 19.07.2022 passed under Section 148A(d) of the Income Tax Act, 1961.
2. Validity of the consequential notice of even date issued under Section 148 of the Act.

Summary:

Issue 1: Validity of the order dated 19.07.2022 under Section 148A(d)
The petitioner challenged the order dated 19.07.2022 under Section 148A(d) of the Income Tax Act, 1961, which was based on allegations that the petitioner was a beneficiary of accommodation entries provided by Mr. Rajnish Garg, amounting to Rs. 50,94,24,738/-. The petitioner argued that he did not maintain any account with HDFC Bank and DCB Bank as alleged. The Assessing Officer (AO) passed a reassessment order on 22.03.2022 under Section 147 read with Sections 144 and 144B, which did not make any addition to the petitioner's income. Despite this, a demand notice was issued for Rs. 67,55,23,292/-. The petitioner appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who noted discrepancies and presumed errors in the AO's calculations. The High Court found that the AO failed to provide fresh material and acted on identical allegations from the previous notice, thus constituting a change of opinion. The Court concluded that the AO reopened a closed assessment without actionable material, leading to the quashing of the order dated 19.07.2022.

Issue 2: Validity of the consequential notice issued under Section 148
The petitioner also contested the consequential notice issued on 19.07.2022 under Section 148, which reiterated the same allegations as the previous notice dated 31.03.2021. The petitioner argued that the AO had no new material and the notice was issued without due application of mind. The respondents claimed the notice was pursuant to the Supreme Court judgment in Union of India v. Ashish Aggarwal, necessitating action under the new regime post Finance Act 2021. However, the High Court observed that the Supreme Court judgment did not mandate triggering proceedings under the new regime for cases already assessed. The Court emphasized that the AO ignored the fact that an assessment order had already been passed on 22.03.2022, making the subsequent notice redundant. Consequently, the notice dated 19.07.2022 under Section 148 was quashed.

Conclusion:
The High Court allowed the writ petition, quashing both the order dated 19.07.2022 under Section 148A(d) and the consequential notice of the same date under Section 148. The Court ordered the Registry to upload relevant documents and vacated the interim order dated 20.09.2022.

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