There Cannot Be 'Disconnect' Between Reasons For Initiating Reassessment U/S 147 Of IT Act & Grounds On Which Final Order Is Passed: Delhi HC
Kapil Dhyani
19 Dec 2024 5:35 PM IST
The Delhi High Court has held that only 'original reasons' which formed the basis for initiating reassessment proceedings under Section 147 of the Income Tax Act can be taken into consideration by the Assessing Officer, for coming to the conclusion that income had escaped assessment.
A division bench of Justice Yashwant Varma Hon'ble Mr. Justice Dharmesh Sharma observed that there cannot be a 'disconnect' between the reasons which had been originally recorded for initiation of reassessment action and the findings on the basis of which the final assessment order is passed.
“...it is ultimately the original reasons which may have been taken into consideration for the purposes of coming to the conclusion that income had escaped assessment alone which would merit consideration,” it said.
In the case at hand, Petitioner had impugned the reassessment proceedings. The allegation was that the Petitioner received a sum from the Delhi States Newspaper Employee Cooperative Group Housing Society but failed to account for the same in his books.
During the hearing, the Respondent-department admitted that no amounts were received by the Petitioner from DSNE CGHS individually. It alleged that the money was routed to M/s Tirupati Construction in which the petitioner is a majority shareholder, owning 99.62% shares.
The Department therefore proposed the final assessment order, seeking to treat the receipt in the hands of M/s Tirupati Construction as a deemed dividend, taxable in the hands of the Petitioner by virtue of Section 2(22)(e).
The High Court however said “there is an evident and apparent disconnect between the reasons which had been originally recorded for initiation of reassessment action and the disclosures which are now made and stand embodied in the final assessment order which has come to be passed. “
It held that when the Department itself conceded that the Petitioner had not directly received any remittances, there would have been no occasion for the Petitioner to have made a disclosure in its Return of Income. Accordingly, invocation of Section 148 could not be sustained.
Reliance was placed on ATS Infrastructure Limited v. Assistant Commissioner of Income Tax Circle 1 (1) & Ors (2024) where the HC had held that the formation opinion under Section 147 and the reasons which are taken into consideration for initiating action of reassessment cannot waiver or be one of changing hues.
The petition was thus allowed and reassessment proceedings came to be quashed.
Appearance: Mr. Ramesh Singh, Sr. Adv. with Mr. Sumit K. Batra, Mr. Manish Khurana, Ms. Priyanka Jindal & Ms. Hage Nanya, Advs for Petitioner; Mr. Vipul Agrawal, SSC with Mr. Gibran Naushad & Ms. Sakshi Shairwal, JSCs for Respondents
Case title: Subhash Chander Dabas v. Assistant Commissioner Of Income Tax
Case no.: W.P.(C) 12784/2019
