Reassessment Proceedings, Senior Officers Like ACIT, PCIT Expected To Apply Mind; Delhi High Court

The Delhi High Court has held that senior officers like ACIT and PCIT are expected to apply their minds to such requests and, only after that, approve the initiation of reassessment proceedings.

The bench of Justice Rajiv Shakdher and Justice Anish Dayal has observed that the reopening of the concluded scrutiny assessment is a serious business. The Act provides for a layered approach precisely for this reason. There are several pitfalls that the court's notice can avoid if the concerned authorities were to look closely at the request made for re-opening.

The petitioner/assessee, Shourya Infrastructure Pvt. Ltd. (SIPL), is in the real estate business, including constructing, buying, and selling immovable properties. SIPL was incorporated in 2006. Upon the petitioner filing its Return of Income (ROI) for the AY in issue, the AO took it up for scrutiny under Section 143(3).

Although reassessment had been triggered, concededly, after the end of four (4) years from the date of the end of the relevant AY and at the end of the sixth year, i.e., on March 31, 2018, the AO did not allege that SIPL had failed to disclose fully and truly all material facts that were necessary for carrying out the assessment. This was a grave folly. The reason, perhaps, why the AO did not allude to this aspect was because queries were raised during the original assessment, which included questions concerning the sale of the subject land. More particularly, answers were furnished by SIPL, along with the relevant documents and material sought by the AO.

The assessee contended that since SIPL was not being assessed for the first time, the information sought against Sr. No. 9 had to be filled in, i.e., the AO had to indicate, firstly, the income at which SIPL was assessed initially and, secondly, whether it was a case of under-assessment at “too low a rate, an assessment that has been made the subject of excess relief of allowing excessive loss or depreciation.”.

The Court observed that it was not a case where the AO sought to draw a fresh inference, which it could have raised when he framed the original assessment order regarding the loan transaction based on the material placed before him. Therefore, the fresh information, as observed by the Court, exposed the falsity of the statement made on behalf of the assessee when the original assessment order was framed.

Counsel For Petitioner: Ruchesh Sinha

Counsel For Respondent: Vipul Agrawal

Case Title: Shourya Infrastructure Pvt. Ltd. Versus ITO

Citation: 2023 LiveLaw (Del) 1255

Case No.: W.P.(C) 12709/2018

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