Income Tax Act| Reassessment Can’t Be Done Merely On Change Of Opinion: Delhi High Court
The Delhi High Court has reiterated that reassessment cannot be done merely on the ground of change of opinion.
The Court observed that, under the guise of power vested in the revenue to reassess an income which had escaped assessment upon production of fresh tangible material, it cannot exercise the power of review.
The Bench of Justice Purushaindra Kumar Kaurav, while relying on CIT v. Techspan India Pvt Ltd (2017 SC), observed, “It is palpably observed from the extract of the impugned corrigendum that no new material has been found by the Revenue which would warrant reopening the assessment. A reading of the aforesaid two notices would crystallize the fact that the corrigendum has been issued merely on the basis of a change of opinion as two different conclusions are being drawn on the basis of same material i.e., audited final accounts of the petitioner. Thus, the AO has apparently reviewed its own decision, which is not permissible as per the settled law… It is trite that under the guise of power vested in the Revenue to reassess an income which had escaped assessment upon production of fresh tangible material, it cannot be allowed to exercise the power of review.”
Advocate Amol Sinha appeared for the Applicant while Jr SC Sanjeev Menon appeared for the Respondent.
A petition was filed assailing the notice issued under Section 148 of the Income Tax Act, 1961 (“Act”) pursuant to a corrigendum of the even date issued to the order under Section 148A(d) of the Act by the respondents for the Assessment Year (“AY”)2017-18.
Petitioner-Company had stated that it filed its ITR declaring a total income of Rs. 4,36,709/-. Respondent-Officer sent the impugned notice proposing to reassess the income based on a belief that certain income had escaped assessment for AY 2017-18.
Responding to the Notice, the Petitioner-company filed a reply asserting that since it had not sold any immovable property during the concerned AY, therefore, no long-term capital gains could arise from such a sale.
Taking into consideration all the submissions, the respondents passed an order dated 30 July 2022 under Section 148A(d) of the Act concluding that the reassessment proceedings could not continue under the given circumstances as it was not a suitable case for issuing a notice under Section 148 of the Act. However, on the even date itself, the respondents issued a corrigendum against the original order passed under Section 148A(d) of the Act, allowing the continuation of reassessment proceedings by issuing a notice under Section 148 of the Act, which had originally been dropped.
The main issue before the Court was whether the reason provided in the corrigendum could be considered as a new tangible material sufficient for initiating reassessment proceedings.
The Court said that it remains established that tangible material or factual information can be received from various external sources and the objections raised by an Audit Party were not absolutely barred. It further noted that the proceedings were firstly closed by the Respondents upon being satisfied after a perusal of the audited final accounts filed by the Petitioner indicating that there was no immovable property held by the Petitioner and therefore, there was no sale undertaken by it.
Accordingly, the Court allowed the writ petition and quashed the impugned proceedings.
Cause Title: Aarti Fabricott Pvt. Ltd. v. Income Tax Officer and Anr. (Neutral Citation: 2024:BHC-AS:26176)
Appearances:
Petitioner: Advocates Amol Sinha and Kshitz Garg
Respondents: Jr SC Sanjeev Menon