Case Law Details
Rajeev Sawhney Vs Assessment Unit (Delhi High Court)
The Delhi High Court examined a writ petition filed by a partner of a professional firm challenging the action of the Assessing Officer in adding to his income amounts received as additional remuneration and discretionary performance reward. The petitioner contended that the partnership firm had already paid tax on these amounts, and therefore, taxing them again in the hands of the partner was not justified. It was argued that the Assessing Officer relied on Section 10(2A) Explanation and Section 28(v) of the Income Tax Act, 1961 without considering the proviso and its implications.
The Court noted that similar issues were pending before it in another writ petition and observed that multiple proceedings had been initiated across the country on the same issue, leading to wider implications for partners in professional firms. Considering the broader impact, the Court directed the Central Board of Direct Taxes (CBDT) to examine the issue and issue an appropriate clarification. The petitioner’s firm was directed to submit a representation to the CBDT within two weeks.
Pending further consideration, the Court stayed recovery proceedings arising from the impugned assessment order dated 06.03.2026 and listed the matter for further hearing.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. The petitioner, who is a partner in a Firm S. R. Batliboi & Co. LLP (SRB) has approached this Court by invoking its jurisdiction under Article 226 of the Constitution of India, challenging action of the Assessing Officer (AO), who has added in petitioner’s income, the amount of additional remuneration and discretionary performance reward recovered by him though the partnership firm has already paid tax on such payments.
2. While highlighting that the firm had undeniably paid tax on these amounts, learned counsel argued that the AO has simply relied upon Section 10(2A) Explanation and Section 28(v) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’) while completely ignoring the proviso and its effect.
3. Learned counsel further submitted that another writ petition being W.P.(C) 3151/2026 (Annexure P-7) on similar issue is pending consideration before this Court, wherein a detailed interim order has been passed.
4. Having said so, Mr. Kamal Sawhney, learned counsel for the petitioner submitted there are a number of proceedings triggered by the various assessing authorities throughout the country. He added that they are either assessing or reassessing such amounts in the hands of the respective partners in spite of the facts that the firm had offered tax on such amounts.
5. Having regard to the fact that the issue in hands may have larger implications and bearing on various assessees who are partners in different professional firms, we deem it appropriate to direct the CBDT to issue a clarification in this regard. The firm of the petitioner (SRB), shall move a representation giving out precise facts and relevant provisions in this regard before the Chairman, CBDT within a period of two weeks’ from today.
6. The Chairman CBDT or some officer(s) nominated by him shall examine the issue, whereafter the CBDT shall issue a clarification in accordance with law.
7. List this case on 18.05.2026.
8. Meanwhile, the recovery proceedings in furtherance of the impugned assessment order dated 06.03.2026 shall remain stayed till further order.
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