Introduction
In the recent case of Sanjay Singhal v. CIT[i], the Delhi High Court assessed the validity of notices issued under ss 148A and 148 of the Income-tax Act, 1961 (‘Act’), for the assessment year (‘AY’) 2015-16. The matter pertained to reopening a completed assessment beyond the statutory time limits under s. 149 of the Act, with the Revenue justifying the action by invoking s. 150. This significant judgment provides clarity on the interplay between ss. 147, 148, and 150 of the Act, outlining the prerequisites for reopening assessments.
Brief Facts
Sanjay Singhal (‘Petitioner’) filed his income tax return for AY 2015-16 on 20.08.2015. Subsequently, on 07.04.2017, a search operation was conducted on the Sharp Group of companies, including the Petitioner’s premises.
Pursuant to the search, a notice under s. 153A of the Act was issued. The department subsequently passed an assessment order on 23.12.2019, determining the Petitioner’s income at approximately Rs. 11.45 crore, including an addition of Rs. 11.35 crore under s. 69A of the Act.
The Commissioner of Income Tax (Appeals) [‘CIT(A)’] deleted the addition, citing the absence of incriminating material against the Petitioner during the search. The Income Tax Appellate Tribunal, New Delhi (‘ITAT’) and the Delhi High Court later upheld this deletion.
On 31.08.2024, the Assessing Officer (‘AO’) issued a notice under s. 148A(b) of the Act, followed by a notice under s. 148 of the Act, relying on the Supreme Court’s decision in Principal Commissioner of Income Tax v. Abhisar Buildwell Private Limited[ii]. The ruling allowed reassessment in completed/unabated cases, provided the conditions under ss.147 and 148 were satisfied.
The Petitioner challenged these notices, citing the expiry of the limitation under s. 149(1) of the Act and the absence of valid incriminating material.
Held
The Delhi High Court ruled in favour of the Petitioner, quashing the notices issued under ss. 148A and 148 of the Act, with the following observations:
The reopening violated the time limits under s. 149(1). S. 150, which overrides other provisions, was deemed inapplicable, as prior judgments contained no findings or directions warranting reassessment under s. 147. Revenue’s reliance on Abhisar Buildwell’s (supra) case was misplaced. The Supreme Court allowed reassessment in the absence of incriminating material, but only if the conditions were under ss. 147 and 148, including the limitation under s. 149, were met.
The High Court reiterated that prior judgments contained no findings or directions under s. 150 to justify reopening. The decision in ARN Infrastructures Indian Ltd. v. ACT[iii] further reinforced that s. 150 cannot override statutory limitations without explicit findings or directions.
Our Analysis
In this case, the High Court’s decision reiterates the statutory framework governing reassessment proceedings under the Act and emphasizes adherence to procedural safeguards. The High Court ruled that reopening a completed assessment is permissible only when all conditions for reassessment are fulfilled, including acting within the prescribed time limits.
The High Court’s judgment in the present case sets a clear benchmark for invoking ss. 147, 148 and 150 of the Act, and highlights the importance of adhering to statutory limitations to prevent arbitrary reassessment, which undermines taxpayers' confidence and the predictability of tax administration. The decision also serves as a cautionary precedent for tax authorities to avoid invoking broader interpretations of judicial precedents or statutory provisions without clear supporting grounds.
End Notes
[i] SCC OnLine Del 8745 dated 03.12.2024.
[ii] (2024) 2 SCC 433.
[iii] (2017) 394 ITR 569.
Authored by Priyavansh Kaushik, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.