Delhi HC Quashes Income Tax Notice over AY Error in Depositing Tax

Anita Arora Vs ACIT (Delhi High Court)

In a noteworthy judgment, the Delhi High Court quashed the Income Tax notice issued against petitioner Anita Arora in the case Anita Arora Vs ACIT. The court concluded that the error in depositing tax was not relevant to the assessment year under scrutiny.

The issue centered around the Assessment Year (AY) 2016-17. The petitioner had received a considerable sum from the sale of a property and also made an investment in bonds. However, the tax for this transaction was mistakenly deposited for AY 2016-17 instead of AY 2015-16. The court scrutinized the circumstances and noted that the petitioner had provided a detailed reply emphasizing that the transaction had been concluded in the AY 2015-16. It was also noted that the demand for AY 2015-16 had been reduced to “nil” after a correction order was passed. Considering these factors, the court concluded that the petitioner’s reply should have been considered before passing the order, which might have averted the mistake.

The Delhi High Court, in its verdict, set aside the impugned order and allowed the Assessing Officer to reexamine the issue. It ordered the issuance of a fresh notice if the proceedings recommence and highlighted the necessity of providing a personal hearing to the petitioner or her authorized representative.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

1. Allowed, subject to just exceptions.

W.P.(C) 8050/2023 & CM No.30997/2023 [Application filed on behalf of the petitioner seeking interim relief]

2. Issue notice.

2.1 Mr Puneet Rai, learned standing counsel, accepts notice on behalf of the respondents/revenue.

3. Given the directions that we propose to pass, Mr Rai says that he does not wish to file a counter-affidavit and he will argue the matter based on the record presently available with the court. Therefore, with the consent of learned counsels for the parties, the writ petition is taken up for hearing and final disposal at this stage itself.

4. This writ petition concerns Assessment Year (AY) 2016-17.

5. A perusal of the notice dated 04.03.2023 issued under Section 148A(b) of the Income Tax Act, 1961 [in short, “Act”] shows that the allegation made against the petitioner is that the source of funds amounting to Rs.1,90,00,000/- could not be ascertained.

5.1 A perusal of the very same notice also shows that this information appears to have been gleaned from the TDS statement, which adverts to consideration received on sale of the subject property.

5.2 Besides this, the notice also refers to acquisition of bonds/debentures.

6. Insofar as the sale of property was concerned, it appears that the petitioner, admittedly, received Rs.1,55,00,000/- and invested Rs.35,00,000/- in bonds. It is in this context that the notice was issued.

7. The record also shows that the petitioner did file a reply, wherein the details of the sale consideration received qua the subject immovable property were furnished.

7.1 In the reply, it was emphasized that the transaction was concluded in the immediately preceding AY, i.e., AY 2015-16.

8. Learned counsel for the petitioner says that the buyer of the subject property had committed an error by depositing tax for the AY in issue, i.e., A.Y. 2016-17.

8.1 It is also submitted that a course correction was made when an order under Section 154 of the Act was passed. In this context, our attention has been drawn to the order dated 20.07.2020 passed under Section 154, read with Section 143(1) of the Act.

9. It is contended by learned counsel for the petitioner that, resultantly, demand for the AY 2015-16 was reduced to “nil”.

10. In sum, it is the submission of the learned counsel for the petitioner that this very transaction, as noted above, was put under the scanner for the AY in issue, i.e., AY 2016-17.

11. Learned counsel for the petitioner says that, had the AO taken into account the petitioner’s reply dated 11.04.2023, the impugned order may not have been passed.

12. Mr Rai says that the record, as is presently available, does show that the transactions concerning the immovable property occurred in AY 2015­16 and tax at source qua the transaction has been deducted.

12.1 Therefore, it is suggested that the impugned order be set aside, with liberty to the AO to reexamine the issue at hand.

13. Accordingly, the impugned order dated 13.04.2023 is set aside.

13.1 Resultantly, the consequential notice dated 14.04.2023 will collapse.

14. In case the AO recommences the proceedings, he will issue a fresh notice to the petitioner.

14.1 The AO will also accord personal hearing to the petitioner and/or her authorized representative. In this behalf, the AO will issue a notice indicating the date and time of hearing.

14.2 Needless to add, the AO will pass a speaking order, a copy of which will be furnished to the petitioner.

15. The writ petition is disposed of in the aforesaid terms. Consequently, the pending application shall stand closed.

16. Parties will act based on the digitally signed copy of the order.