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IN THE HIGH COURT OF DELHI AT NEW DELHI
Manmohan, Manmeet Pritam Singh Arora, JJ.
Paramount Polymers Pvt. Ltd. - Appellant
Versus
Assistant Commissioner Of Income Tax, Circle - 19(1), New Delhi & Anr. - Respondents
W.P.(C) 13480 of 2022 & CM Appls.40983-40984 of 2022
Decided On : 26-09-2022
Income Tax Act - Reopening of Assessment - The court set aside the order passed under Section 148A(d) and remanded the matter back to the Assessing Officer for fresh consideration.
Fact of the Case:
The petitioner challenged the order and notice issued under the Income Tax Act for the assessment year 2017-18, alleging wrongful reopening of assessment due to the merger of transactions with another company.
Finding of the Court:
The court set aside the impugned order and notice, remanding the matter back to the Assessing Officer for fresh consideration.
Issues: Challenging the order under Section 148A(d) and notice issued under Section 148 of the Income Tax Act for the assessment year 2017-18.
Ratio Decidendi: The court found that the respondents-revenue wrongfully passed the order under Section 148A(d) of the Act, ignoring the contentions of the Petitioner and contradicting its own stand in a similar case.
Final Decision: The court set aside the order and notice and remanded the matter back to the Assessing Officer for a fresh decision within four weeks.
JUDGMENT
Manmohan, (Oral) J. - Present writ petition has been filed challenging the order dated 31st July, 2022 passed under Section 148A(d) along with notice dated 31st July, 2022 issued under Section 148 of the Income Tax Act, 1961 ('the Act') for the assessment year 2017-18.
2. Learned counsel for the Petitioner states that the Respondent vide the said order sought to justify the reopening of the assessment for the assessment year 2017-18 alleging escapement of income to the tune of Rs.33,67,382/- on account of the erstwhile Company being a non-filer, not considering the fact that the erstwhile Company got amalgamated with the Petitioner vide an order of NCLT dated 8th November, 2017 resulting in the merger of all the transactions entered into by the erstwhile company, including the impugned transactions with the results of the Petitioner Company for the relevant previous year, and was duly disclosed, and offered to tax, and also assessed by the respondent-revenue.
3. Learned counsel for the Petitioner states that the Respondent wrongfully passed the order under Section 148A(d) of the Act ignoring the contentions of the Petitioner that assessment under Section 143(3) of the Act had already been finalized in case of the Petitioner for the relevant assessment year. He further states that the respondents dropped the proceedings initiated under Section 148A of the Act in case of the erstwhile Company for the assessment year 2018-19 on the same set of facts, thereby contradicting its own stand.
4. Issue notice.
5. Mr.Ruchir Bhatia, learned counsel for the respondents-revenue, accepts notice. On instructions, he states that the respondents-revenue has no objection if the file is remanded back to the Assessing Officer for fresh consideration
6. Keeping in view the aforesaid statement, the impugned order passed under Section 148A(d) and notice issued under Section 148 of the Act both dated 31st July, 2022 are set aside and the matter is remanded back to the Assessing Officer for a fresh decision in accordance with law within four weeks.
7. In the event, the petitioner is aggrieved by the said decision, the petitioner shall be at liberty to file appropriate proceedings in accordance with law.
8. Accordingly, the present writ petition along with applications stands disposed of.
The court emphasized the importance of considering the contentions of the petitioner and maintaining consistency in decisions under the Income Tax Act.
The court emphasized that existing assessments and company mergers must be considered before reopening tax assessments, supporting fairness in administrative actions.
The court upheld the authority of the Assessing Officer to reassess income under amended provisions of the Income Tax Act, reinforcing that objections can be addressed during reassessment proceedings....
The court established that reopening assessments requires a clear and valid reason to believe that income has escaped assessment, which was not present in this case.
A reassessment order is invalid if it violates natural justice by failing to provide a party the opportunity to respond to a notice before its compliance deadline.
Reassessment proceedings are invalid if initiated against a non-existent entity and without considering the taxpayer's response, breaching principles of natural justice.
The judgment established the importance of tangible material and the prohibition of a mere change of opinion in the exercise of power under section 147 of the Income Tax Act.
Reopening of assessment beyond four years without fresh tangible material or proper disposal of objections is illegal under the Income Tax Act.
The main legal point established is that a notice for reassessment cannot be based on a change of opinion but must be grounded on the grounds of income escaping assessment.
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