'Proof Beyond Reasonable Doubt' Is A Principle Of Criminal Law, Not Applicable To Tax Law: Delhi High Court
The Delhi High Court has made it clear that the principle of 'proof beyond reasonable doubt' cannot be made applicable to Section 148 of the Income Tax Act, 1961 which enables an assessing officer to open an assessment if he has 'reason to believe' that an assessee's income escaped assessment.A division bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela observed,...
The Delhi High Court has made it clear that the principle of 'proof beyond reasonable doubt' cannot be made applicable to Section 148 of the Income Tax Act, 1961 which enables an assessing officer to open an assessment if he has 'reason to believe' that an assessee's income escaped assessment.
A division bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela observed, “It is trite that the concept of “proving beyond reasonable doubt” applies “strictu senso” to penal provisions/statutes. It is also trite that in taxing statutes, in particular, section 148 of the Act, the “reason to believe”, must be based on objective materials, and on a reasonable view.”
The observation was made in an appeal preferred by the Revenue after the ITAT set aside a reassessment order by applying the principles enunciated by the Supreme Court in Raja Naykar vs State of Chattisgarh (2024), a criminal case.
Revenue argued that in criminal cases the discharge of burden of proof is beyond reasonable doubt and the same cannot be applied to the principle of “reason to believe” as provided in section 148 of the Act.
Agreeing, the High Court said ITAT misdirected itself in predicating its entire reasoning on a principle of law which is confined to purely penal provisions and is inapplicable to tax matters.
“The reliance placed by the learned ITAT on the aforesaid judgment of the Hon'ble Supreme Court cannot be ignored. It is apparent that the principles enunciated in the criminal jurisprudence in respect of a proof beyond reasonable doubt was erroneously applied to an issue which was subject of provisions of Income Tax Act.”
Court said this principle was followed by the Supreme Court in Deputy Commissioner of Income Tax v. M.R. Shah Logistics (2022) stating that the basis for a valid reopening of assessment should be availability of tangible material, which can lead the AO to scrutinise the returns for the previous assessment year in question, to determine, whether a notice under section 147 is called for.
It held, “Predicated on the aforesaid judgments it can be safely inferred that the concept of burden of proof beyond reasonable doubt is not to be applied in cases such as the present one…In our opinion, the construction of the words “reason to believe” as construed by the Learned ITAT on the anvil of Raja Naykar (supra), is absolutely erroneous and cannot be made applicable to the present case,” and allowed the appeal.
Appearance: Mr.Indruj Singh Rai, SSC with Mr.Sanjeev Menon and Mr.Rahul Singh, JSCs along with Mr.Anmol Jagga, Adv. for Revenue; Mr.Rohit Jain, Adv. with Mr.Samarth Chaudhari, Adv for Respondent
Case title: Pr. Commissioner Of Income Tax-1 v. M/S East Delhi Leasing Pvt. Ltd.
Case no.: ITA 61/2025
