Abhisar Buildwell Judgment Can't Be Construed To Be An Authority To Override Mandate Of Section 245-I: Delhi High Court

The Delhi High Court has held that the judgement of Abhisar Buildwell passed by the Supreme Court cannot be construed to be an authority to override the mandate of Section 245-I of the Income Tax Act.

The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that in terms of the Supreme Court's judgment in the case of Abhisar Buildwell, the completed or unabated assessments can be re-opened by the AO in exercise of powers under Sections 147 and 148 of the Income Tax Act, subject to fulfillment of the conditions mentioned under the provisions.

The petitioner/assessee filed a return for the impugned AY 2007–08, declaring a total income of Rs. 12.42 crore. The returned income was accepted. Pursuant to a search conducted on the premises of Shri Hari Ram Group, a notice under Section 153A was issued, and later, an assessment order was passed making additions. The assessee filed an appeal before CIT (A), who allowed the appeal in part by deleting the disallowance of interest. The assessee filed a settlement application under Chapter XIXA for AYs 2007-08 to 2014-15.

The petitioner as well as the respondent department filed cross-appeals against the CIT's order before ITAT. The ITAT dismissed the department's appeal. The department preferred an appeal before the High Court.

The ITSC passed the final order under Section 245D(4) on the settlement application preferred by the assessee upon an offer made by the assessee to pay an additional sum of Rs. 5 lakhs for AY. In compliance with the settlement,a department passed an order giving effect to the settlement order.

The High Court dismissed the appeal filed by the department. However, the order of the ITSC was assailed by the department before the High Court on the grounds that the grant of immunity under Section 245H and the grant of waiver of interest under Section 234A were dismissed by the High Court.

The department filed the special leave petition before the Supreme Court, which was tagged with a batch of similar matters and subsequently decided in Abhisar Buildwell.

The department initiated the proceedings under Section 148A(b) against the assessee, relying on the judgment passed in Abhisar Buildwell and the consequent Circular 1/2023 issued by CBDT. The department rejected the objections filed by the assessee and passed the order under Section 148A(d) upon approval being accorded by the prescribed authority.

The assessee challenged the order and consequential proceedings.

The assessee contended that once the ITSC is seized of the assessment of a particular AY, it can only be reopened as per the procedure mentioned in Section 245 of the Act and not in the form of separate proceedings under Section 148.

The department contended that the reassessment proceedings are carried out in accordance with the provisions of the Act itself, and the same cannot be termed illegal or void.

The court held that the judgment in Abhisar Buildwell could not be construed to be an authority to override the mandate of Section 245-I of the Act. Sections 150 and 245-I are provisions of equal standing, and a conflict between the two must be resolved by resorting to the principle of harmonious construction. If the settlement arrived at by the ITSC is allowed to be reopened on grounds other than those expressly provided for, it would effectively render the entire mandate of the ITSC vulnerable, and the commitment to the finality of a settlement would be compromised. It is this legislative sanctity of ITSC that gives it special status under the Act.

Counsel For Petitioner: Sameer Rohatgi

Counsel For Respondent: Abhishek Maratha

Case Title: Orchid Infrastructure Developers Pvt. Ltd. Versus PCIT

Citation: 2024 LiveLaw (Del) 350

Case No.: W.P. (C) 16524/2023 & CM APPL. 66626/2023

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