Jyoti Bhatia Vs ACIT (Delhi High Court)
Reassessment Notice Set Aside Because Final Order Alleged New Grounds Not Mentioned Earlier; Income Tax Reopening Invalid Because Reasons Cannot Be Improved After Issuing Section 148 Notice; Delhi High Court Cancels Reassessment Because Escapement Opinion Was Based on Changing Allegations; Section 148 Reassessment Quashed Because Tax Authorities Relied on Different Allegations in Final Order.
The Delhi High Court examined the validity of reassessment proceedings initiated under Sections 148A(b) and 148 of the Income Tax Act, 1961 for Assessment Year 2018-19. The reassessment notice alleged that the assessee had claimed fictitious losses of Rs. 2,53,45,154 in equity and derivatives trading. In response, the assessee submitted a detailed explanation stating that investments had been made in JM Equity Hybrid Fund and that dividends were earned on those investments, along with supporting bank statements and account records. However, while passing the order under Section 148A(d), the tax authorities altered the basis of the allegations and stated that the dividend income arose from sham transactions generated through colourable devices and therefore did not qualify as dividend income.
Read SC Judgment in this case: SC Upholds Delhi HC Ruling as Reassessment Was Based on Changing Grounds
The Court observed that the allegations contained in the final order were materially different from those stated in the original notice under Section 148A(b). According to the Court, reassessment proceedings cannot be sustained on changing reasons or fresh grounds not forming part of the original basis for reopening assessment. The Court relied on earlier judicial precedents holding that the validity of reassessment proceedings must be judged solely on the reasons existing at the time of issuance of notice under Section 148 and that such reasons cannot subsequently be supplemented or improved.
