Reassessment Notice Based On Error Resulting From Oversight Of AO Is Not Valid: Delhi High Court

The Delhi High Court has held that the reassessment notice based on an error resulting from the oversight of the assessing officer is not valid.

The division bench of Justice Vibhu Bakhru and Justice Amit Mahajan has relied on the decision of the Supreme Court in the case of Gemini Leather Stores v. Income Tax Officer, in which it was held that where the Income Tax Officer has all the material before him and has framed the original assessment, it is not open for him to take recourse to Section 147(a) of the Act to remedy the error resulting from his oversight.

The court has observed that it was impermissible for the AO to seek a reopening of the assessment to review its decision regarding the fair market value of the property or deduction on account paid by the assessee to his sisters or the expenses incurred by him.

The petitioner/assessee has assailed a notice under Section 148 of the Income Tax Act, 1961. The assessee was issued the notice to file a return of income on the grounds that his income chargeable to tax for the assessment year 2016-17 had escaped assessment under Section 147.

The Assessing Officer believed that a part of the assessee's income, by way of capital gains resulting from the sale of the property at Vasant Vihar, had escaped assessment.

The assessee contended that his return of income duly disclosed the transaction regarding the sale of property and the computation of capital gains resulting from the said transaction. The assessee's return was picked up for scrutiny, and his income was assessed under Section 143(3) of the Act. The AO did not accept the assessee's computation and recomputed the capital gains. The assessee claimed that the notice, in effect, seeks to re-examine the assessment, which is impermissible.

The issue raised was whether the issue of the reassessment notice, occasioned by a possible change of opinion and seeking to review the assessment order, was valid.

The assessee contended that the reopening of the assessment was not permissible merely on the ground of a change of opinion.

The department claimed that the notice to seek reassessment was issued in response to audit objections. It constitutes tangible material on the basis of which assessments can be reopened.

The court has allowed the petition and quashed the reassessment notice.

Case Title: Deepak Kapoor Versus PCIT

Citation: 2022 LiveLaw (Del) 1065

Date: 09.11.2022

Counsel For Appellant: Advocate Piyush Kaushik

Counsel For Respondent: Advocates Sanjay Kumar, Easha

Click Here To Read Order