AO Becomes 'Functus Officio' After Closure Of Assessment, Must Put Relevant Incriminating Material To Assessee To Re-Confer Jurisdiction: Delhi HC

A division bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela made the observation while dealing with a writ petition filed by Vivo Mobiles, assailing the reassessment proceedings initiated against it under Section 148A(d) of the Income Tax Act, 1961.

As per the SCN, Vivo was accused of availing accommodation entries from one M/s. Zhongmao (India) Eng. Pvt. Ltd.

As Vivo responded to the said SCN claiming that it had no transactions with the above-named company but with one M/s. Zhonghua (India) Eng. Pvt. Ltd., the Revenue proceeded to issue a Clarificatory Letter (noting the correction in the name of the entity) and passed the reassessment order.

At the outset, the High Court observed that when the SCN was issued naming a wrong entity, proceeding with reassessment without issuing a further notice in respect of the alleged nonexistence of the actual entity was “abject violation and infraction of the principles of natural justice”.

It reasoned that the conclusion regarding the actual entity being a non-existent bogus entity was never put to the petitioner in the SCN.

“In other words, the petitioner was never afforded an opportunity to respond to the said allegation. It is trite that principles of natural justice inhere in all administrative and quasi judicial actions, particularly in taxing statutes, unless expressely barred by legislative intent....Ordinarily, after the closure of the assessment proceedings, the Assessing Officer (AO) would be functus officio and to re-confer jurisdiction upon the AO to initiate re-assessment proceedings, relevant incriminating material ought to be put to the assessee before any such re-commencement can be sought,” Court said.

It relied on Grindlays Bank Plc. v. Commissioner of Income-Tax (1990) where the Calcutta High Court had also held that after the assessment is over, the Income-tax Officer becomes functus officio and he cannot reopen the assessment except under very limited circumstances. In order to initiate reassessment proceedings, the Income-tax Officer has to issue a proper notice under section 148.

Court said that in the absence of such material being put to the petitioner, it was deprived of a valuable opportunity to explain the existence or otherwise of the actual entity i.e. M/s. Zhonghua (India) Eng. Pvt. Ltd.

Thus, it allowed the petition and set aside the impugned order.

Appearance: Mr. Ajay Vohra, Sr. Advocate alongwith Mr. Aditya Vohra and Mr. Shashvat Damija, Advocates. For Petitioner; Mr. Shlok Chandra, sr. SC alongwith Ms. Naincy Jain and Ms. Madhavi Shukla, JSCs for Revenue.

Case title: Vivo Mobile India Private Limited v. Assistant Commissioner Of Income Tax & Anr.

Citation: 2025 LiveLaw (Del) 211

Case no.: W.P.(C) 1662/2025

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