Sapphire Foods India Ltd. Vs ACIT (OSD) Delhi & Ors. (Delhi High Court)
Core Issue The Delhi High Court was called upon to decide whether reassessment proceedings initiated under Sections 148A(d) and 148 of the Income-tax Act, 1961 for AY 2016–17 were sustainable when (i) the issue sought to be reopened had already been examined in a completed scrutiny assessment under Section 143(3), and (ii) the reopening was triggered solely by a Revenue Audit objection. The Court also examined whether the notice dated 31.03.2023 was barred by limitation under Section 149 read with the erstwhile first proviso to Section 147 as applicable prior to 01.04.2021.
Facts and Series of Events The assessee had filed its return for AY 2016–17 and was subjected to scrutiny assessment under Section 143(3), completed on 09.12.2018. During the assessment proceedings, specific queries were raised regarding (i) payment of ₹8.90 crore to the Managing Director, and (ii) ₹90.81 lakh towards professional fees. The assessee furnished employment agreements, consultancy agreements, financial statements, and TDS details. The assessment was completed thereafter.
Subsequently, the Revenue Audit raised objections stating that such expenditure was excessive and not justified given the negligible turnover of the company. Acting on this objection, the Assessing Officer initiated proceedings under Section 148A and issued notice under Section 148 on 31.03.2023 alleging escapement of income of ₹9.80 crore.
