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IN THE HIGH COURT OF DELHI AT NEW DELHI
Yashwant Varma, Purushaindra Kumar Kaurav, JJ.
Seema Gupta - Appellant
Versus
Assistant Commissioner of Income Tax - Respondent
W.P.(C) 8614 of 2016
Decided On : 20-03-2024
Income Tax - Re-assessment Proceedings - Section 148 of the Income Tax Act, 1961 - [Section 148] - [Section 143(2), Section 142(1)] - The court discussed the reasons for initiating proceedings under Section 148 of the Act, highlighting the discrepancy between the information provided to the petitioner and the reasons existing on the record of the respondent. The court emphasized the need for the reasons conveyed to the assessee to be the same as those on the record, and concluded that minor discrepancies in language would not justify interference with the reassessment power.
Fact of the Case:
The writ petition sought quashing of re-assessment proceedings drawn under Section 148 of the Income Tax Act, 1961, and challenged the notices issued under Section 148, Section 143(2), and Section 142(1) of the Act. The petitioner contended a perceived distinction in the recordal of reasons for initiating proceedings under Section 148 of the Act.
Finding of the Court:
The court found that the reasons conveyed to the assessee must be the same as those on the record, and minor discrepancies in language would not justify interference with the reassessment power. It held that the reasons recorded and supplied to the petitioner explicitly stated the allegation on the basis of which reassessment under Section 148 was initiated, and therefore, dismissed the writ petition.
Issues: The discrepancy between the information provided to the petitioner and the reasons existing on the record of the respondent, and the validity of the reassessment proceedings.
Ratio Decidendi: The reasons conveyed to the assessee must be the same as those on the record, and minor discrepancies in language would not justify interference with the reassessment power. The court emphasized the need for consistency in the reasons provided to the assessee and those existing on the record.
Final Decision: The writ petition was dismissed, and the impugned notices and order were upheld. All contentions of the petitioner assessee on merits were kept open to be urged in the course of the assessment proceedings.
JUDGMENT
Yashwant Varma, J.
1. This writ petition seeks quashing of proceedings for re- assessment drawn pursuant to the powers conferred under Section 148 of the Income Tax Act, 1961[Act] and assails the notice dated 31 March 2016 issued under Section 148 of the Act as also the order dated 25 July 2016 issued by the respondent. The writ petitioner also additionally assails the notice dated 10 June 2016 issued under Section 143(2) of the Act and the notice dated 01 August 2016 issued under Section 142(1) of the Act.
2. The record would reflect that when the writ petition was originally entertained, we had by an order dated 26 September 2016 restrained the Assessing Officer[AO] from completing the assessment proceedings. It is that interim order which had continued on the writ petition till date.
3. On 07 August 2023, the Court upon hearing preliminary submissions of the parties had passed the following order:
"1. Mr Sumit Lalchandani, learned counsel for the petitioner, informs us that this is a case where two sets of reasons have been recorded.
2. In this behalf, Mr Lalchandani has drawn our attention to Annexure P-7, which is appended on page 47 of the case file, which, according to him, is the first set of reasons.
3. Insofar as second set of reasons are concerned, our attention is drawn to Annexure R-6 which is appended to the affidavit filed on behalf of the respondent/revenue pursuant to an order dated 05.01.2018 issued by the court. [See pdf page 125 of the case file].
4. Mr Shlok Chandra, learned senior standing counsel, who appears on behalf of respondent/revenue, says that he would like to file written submissions in the matter. Leave in this behalf is granted.
5. List the matter on 10.10.2023."
4. It appears that the principal contention of the petitioner was a perceived distinction in the recordal of reasons for initiating proceedings under Section 148 of the Act as appearing upon a reading of a copy of which was supplied to the petitioner and the proforma for recording reasons to initiate proceedings under Section 148 of the Act which existed on the record of the respondent. It is this aspect which was highlighted by Mr. Lalchandani, learned counsel appearing for the writ petitioner during the course of his oral submissions.
5. According to the writ petitioner, the reasons recorded for selection of the petitioner's case for reassessment under Section 148 of the Act and as provided to the petitioner, read as follows:
"PAN:AAIPG5271B
A.Y. 2009-10
An Information via e-mail was received from ADIT(lnv.), Unit- 1(3), Ahmedabad vide letter no. AD IT(lnv) 1(3)/AHD/CCM/Dissemination/e-mail/15-16 dated 17.03.2016 in respect of Client Code Modification, dissemination of beneficiary clients who have taken contrived losses and shifted out profits during the F.Y. 2008-09 to 2011-12.
The Ahmedabad Investigation Directorate, as an institution response to orchestrated misuse for client code modification for tax evasion, carried out coordinated limited purpose surveys u/s 133A of the Income Tax Act, 1961 at the premise of 12 brokers and few of their clients across India on 23.03.2015. After considering the contention of brokers, it was concluded by the ADIT that CCM has been used as a tool for tax evasion and only settled trades have been considered to arrive at the beneficiaries.
As per information received in this case, it is seen that the assessee during the F.Y. 2008-09 has profit shifted out of Rs. 20,29,332/- and losses shifted in of Rs. 3,98,825/- resulting in net reduction in income of Rs. 16,30,506/through Client Code Modification.
In view of the above, approval of the Id. Principal Commissioner of Income Tax, Delhi -14,New Delhi to issue notice u/s 148 of the IT Act 1961, in this case is solicited."
6. Pursuant to our order dated 05 January 2018, the respondent also brought on record the proforma maintained by it for the purposes of recordal of reasons in order to initiate proceedings under Section 148 of the Act. The said proforma is ex
Consistency in the reasons provided to the assessee and those existing on the record is crucial in reassessment proceedings under Section 148 of the Income Tax Act, 1961.
Under section 147 of the Act the proceedings for the reassessment can be initiated only if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any....
Assessment - Notice - limitation provided under Section 149 of the Act for issuance of notice commences from the date when the notice is issued and not when the notice served - No interference requir....
Income Tax – Assessment – Issuance of notice - notice under Section 148 was issued by an AO while the order recording reasons was issued by another officer is not borne out from the record – No inter....
Notice under Section 148 was quashed due to lack of timely issuance and failure to substantiate the belief of income escapement with required cogent material, constituting jurisdictional errors.
The court established that the discretionary nature of inquiries under Section 148A does not mandate a personal hearing or exhaustive justification for the Assessing Officer's decisions.
Reopening of assessment under Section 148 is invalid if based on materials already available during the original assessment, constituting a mere change of opinion without fresh evidence.
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....
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