Delhi High Court: In the present petition filed for assailing the notice dated 30-06-2022, issued under Section of (‘the Act’), the Division Judge Bench of Yashwant Varma and Purushaindra Kumar Kaurav*, JJ., was of the opinion that the impugned proceeding was unsustainable and deserve to be quashed. The Court while allowing the writ petition, quashed the notices issued via corrigendum dated 30-07-2022 along with all the consequential proceedings.
Background:
In the instant case, the petitioner was a company registered with the Registrar of Companies and had been regularly filing its Income Tax Return (‘ITR’). On 30-10-2017, the petitioner was stated to have filed its ITR, declaring a total income of Rs. 4,36,709/-.
On 28-06-2021, the respondents issued a notice under Section 148 of the Act, proposing to reassess the income based on a belief that certain income had escaped assessment for Assessment Year (‘AY’) 2017-18. The petitioner duly filed a reply on 07-06-2022, asserting that since it had not sold any immovable property during the concerned AY, therefore, no long-term capital gains could arise from such sale. The petitioner also clarified that it had purchased an immovable property worth Rs. 1,81,00,000/- via registration deed dated 18-5-2016 and denied any transaction involving an amount of Rs. 1,16,00,000/-.
The respondent, after considering the submissions, concluded that both claims given by the petitioner were true. Therefore, taking into consideration all the submissions, the respondents passed an order dated 30-07-2022 under Section of 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.
Analysis:
The limited question which stands posited before the Court was whether the mere suspicion for reopening assessment provided in the corrigendum could be considered as a new tangible material sufficient for initiating reassessment proceedings?
The Court noted that the proceedings dated 30-07-2022 were firstly closed by the respondents upon being satisfied that there was no immovable property held by the petitioner as on 01-04-2016 and therefore, there was no sale undertook by him. However, on 30-7-2022 itself, the respondents again issued a corrigendum initiating the reassessment proceedings.
The corrigendum stated that, ‘On examination of the audited final accounts filed by the assessee company it was observed that though there was no immovable property held by it as on 01-04-2016 but it may be possible that the property may have been purchased by the assessee later. Mere denial of transaction was not enough unless the transaction was fully investigated from the source. Therefore, it was assumed that there was undisclosed sale of property of Rs.1,16,00,000/- by the assessee during the year under consideration.’
The Court observed that the impugned corrigendum had no new material which was found by Revenue to reopen the assessment. A reading of impugned notices would crystallize the fact that the corrigendum had been issued merely on the basis of a change of opinion as two different conclusions were being drawn on the basis of same material which was audited final accounts of the petitioner. Thus, the Assessing Officer had apparently reviewed its own decision, which was not permissible as per the settled law.
The Court then stated that, the power of reassessing an income which had escaped assessment upon production of fresh tangible material was vested to Revenue, it cannot be allowed to exercise the power of review. The Court then referred a case CIT v. Techspan India (P) Ltd. , wherein, it was held that, “Section 147 of the IT Act does not allow the reassessment of an income merely because of the fact that the assessing officer has a change of opinion with regard to the interpretation of law differently on the facts that were well within his knowledge even at the time of assessment. Doing so would have the effect of giving the assessing officer the power of review and Section 147 confers the power to reassess and not the power to review.”
The Court, after considering the aforesaid facts and circumstances, was of the opinion that the impugned proceedings were unsustainable and deserved to be quashed. The Court, while allowing the writ petition, quashed the notices issued via corrigendum dated 30-07-2022 along with all the consequential proceedings.
[Aarti Fabricot (P) Ltd. v. CIT, W.P.(C) 16700 of 2022, decided on 03-07-2024]
*Judgement Authored by: Justice Purushaindra Kumar Kaurav
Advocates who appeared in this case:
For Petitioner: Amol Sinha and Kshitz Garg, Advocates.
For Respondent: Sanjeev Menon, Jr.SC.
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