Reassessment Cant Be Initiated Once Nature & Source Of Receipts Have Been Satisfactorily Explained/Proved: Delhi HC Quashes Proceedings U/s. 148 Income Tax Act
The Delhi High Court quashed the proceedings under Section 148 of the Income Tax Act holding that reassessment cannot be initiated once the nature and source of receipts have been satisfactorily explained/proved.
The Court quashed the reassessment proceedings under Section 148 of the Income Tax Act, 1961 (the Act) against various entities within the Experion Group (petitioner) by the Assessing Officer (AO). The Court noted that the identity and creditworthiness had been examined and accepted in previous assessments by the Income Tax Department (Department), leaving no grounds for the reassessment actions.
A Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja observed, “The identity and creditworthiness of Gold Singapore and the genuineness of the transaction has been accepted by the Department while framing assessments for AY 2012-13, 2015-16 and 2020-2021. The transaction of investment of share capital in the petitioner company has been duly examined in subsequent assessment years and accepted in completed assessments/reassessments under Section 143(3) of the Act. Once the nature and source of receipts have been satisfactorily explained/proved and AO has not contradicted the explanation/information given by the assessee, there lies no cause for initiating the reassessment action for the impugned AYs 2008-09 & 2011-12.”
Senior Advocate S. Ganesh appeared for the petitioner, while SSC Sunil Agarwal represented the respondents.
The petitioners, Experion Hospitality Pvt. Ltd. and Experion Developers Pvt. Ltd., both part of the Experion Group, were subject to separate reassessment notices under Section 148 of the Act for AY 2008-09 and 2011-12. The reassessment actions were triggered by information received from the Directorate of Intelligence (Intell. & Cr. Inv.) regarding investments made by Gold Singapore, a Singapore-based entity, into the petitioner companies.
The Department alleged that Gold Singapore had acted as a conduit for funds sourced from entities located in tax havens and suspected that the funds received may have ‘escaped assessment.’
The petitioners challenged these reassessment notices by filing writ petitions under Article 226/227 of the Constitution challenging the grounds for reopening the assessments.
The High Court noted that the impugned reassessment proceedings had been initiated primarily for the reason that Gold Singapore allegedly did not appear to be carrying out any business activities in Singapore and had been floated to act as a conduit for further investments in Indian companies. But the Court pointed out that in the assessment orders, the Assessing Officer had “accepted the transaction of share application money/share capital received from Gold Singapore without any addition in that regard and also accepted the status of the holding company i.e. Gold Singapore.”
Consequently, the Court held, “In view of the aforesaid, we are of the opinion that the reasons for initiation of the impugned assessment proceedings do not survive and therefore the impugned notices issued under Section 148 of the Act and the proceedings initiated pursuant thereto are quashed.”
Accordingly, the High Court disposed of the petition.
Cause Title: Experion Hospitality Pvt Ltd. v. Income Tax Officer & Ors. (Neutral Citation: 2024:DHC:8299-DB)
Appearance:
Petitioner: Senior Advocate S. Ganesh; Advocates Vaibhav Kulkarni, Udit Naresh and Himanshu Aggarwal
Respondents: SSC Sunil Agarwal; Jr. SC Shivansh B. Pandya and Viplav Acharya; Advocate Utkarsh Tiwari