Delhi HC Quashes Reassessment Proceedings U/S 148 Due to Procedural Lapses and Lack of Valid Grounds

The Delhi High Court in a ruling struck down reassessment proceedings u/s 148 of the Income Tax Act, 1961, citing procedural lapses and the absence of valid grounds.

Subash Chander Dabas the applicant proceeded to the High Court against a reassessment order passed via the Assistant Commissioner of Income Tax for the 2012-13 assessment years(AY) u/s 148 of the Act.

In the initial assessment, it alleged that the taxpayer a builder unable to notify ₹24 Crore transactions from the Delhi States Newspaper Employee Cooperative Group Housing Society in the 2011-12 Financial Year even but the taxpayer admitted such an income.

The assessing officer on seeing this income receipt made the opinion that the applicant is not able to reveal its income effectively.

The revenue on the basis of the information from the Income Tax Investigation Wing suspected other unaccounted cash in the accounts of the taxpayer which directed to the assessment. Benami transactions to sell flats at higher prices and divides the funds among his other firms Tirupati Construction and Tirupati Constwell Pvt Ltd, as noticed by the revenue.

The petitioner for such allegations claimed that the reassessment was on the basis of only assumptions and absence of the conclusive proof. The petitioner argued that the said transactions have been revealed in the before assessments which do not need any reassessment.

The HC on hearing both sides carried that the reassessment should be on the grounds of proof rather than speculation. The court additionally cited that it witnessed a transformation in the revenue claims during the proceedings. The revenue relied on incomplete inquiries and was unable to prove that the transactions had not undergone earlier assessment.

The court said that under Section 143(3), the petitioner has been levied and satisfies all the disclosure needs. However, the reassessment notice that followed the assessment unable to fulfil the statutory needs u/s 147 for reopening an already closed assessment.

The two-judge bench of the Delhi High Court, comprising Justice Yashwant Varma and Justice Dharmesh Sharma, carried that the reassessment authority can not be used to rectify the mistake from the previous reviews. Any new notice should be on the grounds of the effective records and the reasons should comply with all the procedural safeguards furnished in the Income Tax Act.

Therefore the petition was permitted and the court struck down the reassessment notice and order u/s 147 and 148 of the Income Tax Act.