Sufficiency Of The Correctness Of Material Is Not To Be Considered While Issuing Reassessment Notice: Delhi High Court

The division bench of Justice Manmohan and Justice Dinesh Kumar Sharma observed that the courts should exercise their writ jurisdiction very sparingly if there is an "alternative efficacious remedy." The petitioner cannot be allowed to short circuit the procedure merely out of convenience. If a statutory forum is created by law for the redressal of grievances, a writ petition should not be entertained ignoring the statutory dispensation.

The petitioner/assessee had filed a return of income for the assessment year 2010-11 showing an income of Rs. 5,94,850. The petitioner received a notice under Section 133(6) of the Income Tax Act and for which the petitioner also received a reminder, as the petitioner could not respond as he was busy organising his stall in an exhibition.

However, the response in part was sent stating that there is no question of disallowance of interest on the amount paid to Gaurav. The petitioner received a re-assessment notice.

The grievance of the petitioner was that the money had been given to his son, Gaurav Babbar, which had mainly come from funds lying in the account of his mother, Veena Babbar, to the tune of Rs. 1,14,80,076. The petitioner has contributed an amount of Rs. 39,96,043 against the capital of the petitioner at Rs. 3,04,14,983.

The department stated that the Assessing Officer received a Tax Evasion Petition (TEP) folder in the case of the petitioner from the Investigation Wing, Delhi, of the Income Tax Department. It was revealed that the petitioner had paid a significant sum of Rs. 1.5 crores on behalf of his son, Gaurav Babbar, as consideration towards the purchase of the property, which was admitted by the petitioner.

The department stated that the bank statement maintained with the Indian Overseas Bank revealed that the account in question was an OD/CC account in the name of the petitioner's proprietorship concern and that significant sums were being incurred as interest expenses on sums drawn as OD. It was submitted that the assessment for the subject assessment year 2010-11 had not been previously subjected to scrutiny assessment at the relevant time. The petitioner's "balance sheet" for the subject assessment year also carried a sum of Rs.1,54,76,119 as a purported "loan & advance" to his son, Sh.Gaurav Babbar. However, the petitioner's "profit & loss account" contained no interest income earned from such sums provided as purported loans, despite the petitioner claiming significant "interest expenses" of about Rs.1 crore, including an amount of Rs.22,80,083 as interest expenditure for the loan, for the concerned assessment year.

The petitioner stated that the reassessment notice was sent without any application of mind. The sanction was granted on the wrong facts. The objections filed by the petitioner were not at all considered. The petitioner has admitted that the amount given to Gaurav Babbar was not for business purposes but was given because Veena Babbar, the mother of Gaurav Babbar, had given interest-free funds to the petitioner which she wanted to be given to Gaurav Babbar.

The court relied on the decision of the Supreme Court in the case of Raymonds Woolen Mills Ltd. vs. Income Tax Officer and Ors, in which it was held that at the time of initiating the proceedings under Section 147 of the Income Tax Act, the assessing officer has to only examine whether there is prima facie material on the basis of which the assessment should have been reopened.

"We consider that there was sufficient material on the record for re-opening/re-assessment of the case of the petitioner for the concerned assessment year. This court is not making any comment on the merits of the case. The assessee will have the right to put up his case before the assessing officer. We consider that there is no violation of the principles of natural justice. The revenue department has followed the procedure prescribed by law. We consider there is no reason to interfere at this stage. Hence the petition is dismissed," the court said.

Case Title: Kedar Nath Babbar Versus Assistant Commissioner of Income Tax

Citation: 2022 LiveLaw (Del) 434

Dated: 25.04.2022

Counsel For Petitioner: Advocates K. R. Manjani, Tarun

Counsel For Respondent: Advocate Puneet Rai

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