Back
IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Shakdher, Girish Kathpalia, JJ.
Raj Birbal – Appellant
Versus
Assistant Commissioner of Income Tax Circle-61(1) & Ors. – Respondents
W.P.(C) 11910 of 2018
Decided On : 17-05-2023
Income Tax Act - Reassessment Proceeding - Section 148 - AY 2011-2012 - 147/148
Fact of the Case:
The writ petition concerns the reassessment proceeding triggered against the petitioner for AY 2011-2012 under Section 148 of the Income Tax Act, 1961. The reassessment was based on a Tax Evasion Petition (TEP) and disallowance of expenses claimed in AY 2014-15.
Finding of the Court:
The court found that the reassessment proceeding was not based on sufficient material and the TEP alone was not enough to trigger the reassessment. The court also emphasized that income in each AY is to be assessed independently, and the principle of consistency did not apply in this case.
Issues: The crucial issue was whether the reassessment proceeding could have been triggered based on the available material, specifically the TEP and disallowance of expenses in AY 2014-15.
Ratio Decidendi: The court held that the reassessment proceeding could not be based solely on the TEP and the disallowance of expenses in a different AY. It emphasized the need for sufficient material to trigger reassessment and the independent assessment of income in each AY.
Final Decision: The court set aside the impugned notice and order, disposing of the petition in favor of the petitioner.
JUDGMENT
Rajiv Shakdher, J. (Oral)
1. This writ petition concerns Assessment Year (AY) 2011-2012.
2. The writ petition is directed against notice dated 31.03.2018 issued under Section 148 of the Income Tax Act, 1961 [in short, "the Act"] and the order dated 01.10.2018 passed by the Assessing Officer (AO), whereby objections preferred by the petitioner, qua the commencement of the reassessment proceeding, were disposed of.
3. Pertinently, Ms Prem Lata Bansal, Senior Advocate and Ms Kavita Jha, Advocate, who appear on behalf of the petitioner, say that the reassessment proceeding triggered against the petitioner for the AY in issue, i.e., AY 2011-12, are completely flawed.
4. Ms Bansal and Ms Jha submit that the reassessment proceeding was triggered based on a Tax Evasion Petition (TEP), with no tangible material made available to the AO for forming an opinion that there was reason to believe that income chargeable to tax has escaped assessment.
5. Furthermore, Ms Bansal and Ms Jha say that the other ground, which has presumably, triggered reassessment proceeding is that certain expenses claimed by the petitioner, on account of salary and other heads, had been disallowed in AY 2014-15 by the AO on the ground that they were bogus.
5.1. Ms Bansal and Ms Jha inform us that although the AO had made addition(s) on that ground in AY 2014-15 by disallowing 50% of the expenses claimed by the petitioner, in an appeal preferred by petitioner, this decision was reversed.
6. In support of this plea, Ms Bansal and Ms Jha have placed on record a hard copy of the decision of the Commissioner of Income Tax (Appeals) [in short, "CIT(A)"] dated 19.02.2019. A copy of the said decision has been furnished to Mr Abhishek Maratha, learned senior standing counsel, who appears on behalf of respondent/revenue.
7. Ms Bansal and Ms Jha, on instructions of petitioner, who is present in the court, say that no appeal has been preferred by the respondent/revenue against the said order of the CIT(A), with the Income Tax Appellate Tribunal.
8. Mr Maratha, in defense of the impugned notice and order, submits that the same are sustainable, in view of the fact that there was no material available which would have substantiated the expenses claimed by the petitioner against salaries and under other heads. In other words, it was Mr Maratha's submission that the reassessment triggered against the petitioner qua AY in issue ought not to be interdicted.
9. We have heard learned counsel for parties.
10. The crucial issue which arises for consideration is: whether, in the instant case, based on the material which was available on record, the reassessment proceeding could have triggered against the petitioner?
11. It is not in dispute that the reassessment proceeding was triggered on account of the TEP. There is no other material available on record, based on which the AO formed an opinion, that there was reason to believe that income chargeable to tax had escaped assessment. This is evident upon a bare perusal of the reasons furnished by the AO for reopening the assessment for the AY in issue, i.e., 2011-12.
12. For the sake of convenience, the relevant portion of the said document which is dated 02.08.2018, is set forth hereafter:
| 1. | Brief details of the Assessee: Sh. Raj Birbal is an Advocate by profession and derived income from Business or Profession, income from House Property and income from Other Sources. The assessee filed his Return of Income for A.Y 2011-12 on 29.09.2011 declaring total income of Rs.1,28,03,090/- which has been processed u/s 143(1) of the lncome Tax Act, 1961 on 13.11.2011. |
| 2. | Brief details of information collected/received by the AO: Information was passed on from the Investigation Wing New Delhi for a tax evasion petition stating the allowing: "This is bring to your notice that the abovementioned assessee who is assessed to tax by the Assistant Commissioner of Income Tax, Circle-61(1), New Delhi, who falls under your charge has been manipu |
The central legal point established in the judgment is that a reassessment proceeding must be based on sufficient material and income in each assessment year is to be assessed independently.
Reassessment under Section 147 after four years requires proof of failure to disclose material facts, which was not demonstrated in this case.
The court established that under the amended Section 148A of the Income Tax Act, the requirement to record 'reason to believe' has been replaced with a subjective decision-making process, allowing fo....
If an assessing authority forms an opinion during the original assessment proceedings on the basis of material facts and subsequently finds it to be erroneous; it is not a valid reason under the law ....
The main legal point established in the judgment is that reassessment proceedings must be based on tangible material and cannot be initiated solely on the basis of a 'change of opinion' without fresh....
Point of Law : Court satisfied that there was prima facie material available on record before the assessing officer for issuing a notice for reassessment and the notice under Section 148.
The amended Income Tax Act allows reassessment without prior 'reason to believe', broadening the scope for initiating proceedings based on third-party information.
Mere change of opinion is not a ground for reopening of assessment under Section 147 of the Income Tax Act, 1961.
Reassessment under Section 147 requires proof of failure to disclose material facts during the original assessment, which was not demonstrated in this case.
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
