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IN THE HIGH COURT OF DELHI AT NEW DELHI
Rajiv Shakdher, Girish Kathpalia, JJ.
Sh. Manujendra Shah – Appellant
Versus
Commissioner of Income Tax-8 & Anr. – Respondents
W.P.(C) 12677 of 2018
Decided On : 18-07-2023
Reassessment - Income Tax - 143(1), 133(6), 148 of the Income Tax Act, 1961 - The court discussed the provisions of Section 50C of the Act and the application of the same in the case. It highlighted the importance of 'live link' between the material available and the reasons for belief that income has escaped assessment. The court emphasized the need for the AO to apply his mind and secure relevant material before triggering reassessment proceedings. The court also criticized the nonchalant approach of the Principal Commissioner of Income Tax in granting approval for reopening the assessment.
Fact of the Case:
The petitioner filed his Return of Income for AY 2011-12, which was processed under Section 143(1) of the Income Tax Act, 1961. Subsequently, reassessment proceedings were initiated by the Assessing Officer (AO) based on the petitioner's alleged failure to disclose the full and true value of consideration of lands sold. The AO's reasons for reassessment were based on the provisions of Section 50C of the Act.
Finding of the Court:
The court found that the AO failed to apply his mind and secure relevant material before initiating reassessment proceedings. It also criticized the nonchalant approach of the Principal Commissioner of Income Tax in granting approval for reopening the assessment. As a result, the court allowed the prayer made in the writ petition and quashed the notice issued under Section 148 of the Act.
Issues: The key issues revolved around the application of Section 50C of the Act, the correctness of the cost of acquisition arrived at by the AO, and the failure of the AO and the Principal Commissioner of Income Tax to apply their minds and secure relevant material before initiating and approving the reassessment proceedings.
Ratio Decidendi: The court emphasized the importance of a 'live link' between the material available and the reasons for belief that income has escaped assessment. It highlighted the need for the AO to apply his mind and secure relevant material before triggering reassessment proceedings. The court also criticized the nonchalant approach of the Principal Commissioner of Income Tax in granting approval for reopening the assessment.
Final Decision: The court allowed the prayer made in the writ petition and quashed the notice dated 29.03.2018 issued under Section 148 of the Act.
JUDGMENT
Rajiv Shakdher, J. (Oral)--This writ petition concerns Assessment Year (AY) 2011-12.
2. Notice in this petition was issued on 27.11.2018 by a coordinate bench of this court.
2.1. At the stage of issuance of notice in the writ petition, an interim direction was passed to the effect that the respondent/revenue would not pass a final reassessment order during the pendency of the writ petition.
3. Since then, pleadings in the writ action have been completed.
4. Dr. Rakesh Gupta, learned for the petitioner, says that the reassessment proceedings have been triggered without due application of mind by the Assessing Officer (AO).
5. It is Mr Gupta's submission that even the authority granting approval has not applied its mind as to whether the AO had sufficient material available with him to form a belief that income which was otherwise chargeable to tax had escaped assessment.
6. The record shows that the petitioner had filed his Return of Income (ROI) for the aforementioned AY i.e., AY 2011-12 on 29.06.2012.
6.1. The ROI was processed under Section 143(1) of the Income Tax Act, 1961 [in short, "the Act"].
7. The petitioner was served a notice dated 24.01.2014 under Section 133(6) of the Act. To this notice, the petitioner filed his response on 05.02.2014.
8. Thereafter, the petitioner was issued a non-statutory letter dated 10.06.2018 by the Assistant Commissioner of Income Tax (ACIT) seeking details of lands sold. The petitioner was also directed to furnish the documents with regard to the sale.
8.1. This notice was replied to by the petitioner via communication dated 23.06.2014.
9. The afore-mentioned correspondence led to the ACIT serving the notice dated 29.03.2018 under Section 148 of the Act on the petitioner.
10. The petitioner filed a reply on 11.04.2018 to the notice issued under Section 148 of the Act.
11. Thereafter, correspondence was once again exchanged between the petitioner and the ACIT on 15.05.2018 when the ACIT issued a letter to the petitioner, to which response was filed on 25.05.2018.
12. Ultimately, the petitioner was furnished reasons for re-opening the assessment via letter dated 02.07.2018.
12.1. This led to the petitioner filing his objections. The objections which the petitioner filed are dated 17.07.2018.
12.2 The petitioner, inter alia, raised the ground that the ACIT had no material available with him which could have formed the basis for re-opening the assessment.
13. The record shows that the objections were disposed of by the AO on 24.09.2018. It is the petitioner's case that the order disposing of the objections was served upon him on 03.10.2018.
14. The petitioner appears to have filed a supplementary objection, which is dated 12.10.2018. These objections were, however, filed with the ACIT, on 15.10.2018.
15. The petitioner was issued two (2) separate notices of even date i.e., 15.10.2018, under Section 143(2) and 142(1) of the Act.
16. It is at this stage that the petitioner decided to move to Court by way of the present writ action.
17. The main pivot of Dr. Gupta's submission is the reasons recorded by the AO. Therefore, for easy reference, the reasons recorded by the AO, as furnished to the petitioner, are extracted hereafter:
"Reasons for initiating the proceedings u/s 147 of the I.T. Act, 1961 in case of Sh. Manujendra Singh for A.Y. 2011-12."
1. This is the case of an individual having income from house property, capital gains and other sources for the captioned year. For the year under consideration the assessee had filed his return of income on 29.06.2022 declaring taxable income of Rs.2,70,21,140/-. Subsequently, the return was processed u/s 143(1) of the Act on 29.04.2013 at returned income. As per the records available with this office, no scrutiny assessment has been found to be completed in this case for A.Y. 2011-12.
2. Initially, in the instant case, an information has been received from the ITO, Ward-5(3), New Delhi vide letter no. ITO/Ward-5(3)/File No. 17/20
The main legal point established in the judgment is the requirement for the AO to have a 'live link' between the material available and the reasons for belief that income has escaped assessment. The ....
Reopening of assessments requires tangible evidence of income escapement; mere change of opinion based on previously disclosed facts is insufficient.
The main legal point established in the judgment is that re-assessment based on a change of opinion is impermissible under the Income Tax Act, and tangible material is required to justify re-opening.
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The main legal point established in the judgment is the requirement of tangible material and cogent facts for invoking powers under Section 147 of the Income Tax Act, and the importance of the reason....
The power to reopen a completed assessment under Section 147 of the Act 1961 has been bestowed on the Assessing Officer, if he has reason to believe that any income chargeable to tax has escaped asse....
Reopening of assessment under S.147 is valid when the Assessing Officer has a reasonable belief of income escapement supported by tangible material, even if initial returns were accepted, provided su....
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