The Delhi High Court has held that the Assessing Officer (AO) cannot review its own order.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed in the extract of the impugned corrigendum that no new material has been found by the department, which would warrant reopening the assessment. The corrigendum has been issued merely on the basis of a change of opinion, as two different conclusions are being drawn on the basis of the same material, i.e., the audited final accounts of the petitioner. Thus, the AO has apparently reviewed its own decision, which is not permissible as per the settled law.
The petitioner/assessee is a company registered with the Registrar of Companies and has been regularly filing its Income Tax Return (ITR). On October 30, 2017, the petitioner filed its ITR, declaring a total income of Rs. 4,36,709.
The department issued a notice under Section 148 proposing to reassess the income based on a belief that certain income had escaped assessment for AY 2017–18.
The court quashed the notice issued on June 28, 2021, under Section 148 of the Act. In light of the Supreme Court's judgment in Union of India & Others v. Ashish Agarwal, the proceedings were revived, and a show cause notice was issued under Section 148A(b) on May 24, 2022, for the relevant AY.
In response to the notice, the petitioner duly filed a reply asserting that since it had not sold any immovable property during the concerned AY, therefore, no long-term capital gains could arise from such a sale. The petitioner also clarified that it had purchased an immovable property worth Rs. 1,81,00,000/- from Mr. Vinod Popliand and denied any transaction involving an amount of Rs. 1,16,00,000/- with Mr. Sunil.
The department concluded that the petitioner's claim regarding the purchase of property worth Rs. 1,81,00,000/- from Mr. Vinod Popli via registration deed dated May 18, 2016 was correct. With respect to the second allegation, the petitioner denied any transaction with Mr. Sunil, which was further examined and found to be true as the petitioner did not possess any immovable property.
The assessee contended that the department cannot be allowed to initiate proceedings of reassessment as per their opinion and convenience. The department has failed to provide any cogent reasoning in the corrigendum that was issued for the opening reassessment. The reasons to believe are imperative for the initiation of reassessment, which are missing in the case at hand. It is well settled that a mere change of opinion would not constitute a reason to reopen the assessment proceedings, and the said position is even more fortified by the fact that the alleged information provided with the show cause notice is incorrect and does not relate to the petitioner. A perusal of the corrigendum would indicate that the case of the petitioner is being reopened on a mere suspicion of conducting roving inquiries, which is completely impermissible as per the Act.
The department contended that notice has been issued after the final objections were raised by the Comptroller and Auditor General of India to the effect that the assessment has not been made in accordance with the provisions of the Act. There is no infirmity in the notice issued under Section 148 since the same has been made in reference to the survey conducted under Section 133A of the Income Tax Act.
The court, while allowing the petition, held that the guise of power vested in the department to reassess an income that had escaped assessment upon the production of fresh tangible material cannot be used to exercise the power of review.
The court quashed the notice issued via corrigendum dated July 30, 2022, along with all the consequential proceedings.
Counsel For Petitioner: Amol Sinha
Counsel For Respondent: Sanjeev Menon
Case Title: Aarti Fabricott Private Limited Versus Income Tax Officer, Ward 1(1), Delhi & Anr.
Case No.: W.P.(C) 16700/2022