Case Law Details
Captive Commerce Pvt. Ltd. Vs ACIT (ITAT Delhi)
Introduction: The Income Tax Appellate Tribunal (ITAT) in Delhi recently delivered a landmark judgment in the case of Captive Commerce Pvt. Ltd. Vs Assistant Commissioner of Income Tax (ACIT). The tribunal quashed the reassessment order issued under Section 148 of the Income Tax Act, 1961, on grounds of being based on vague reasons. This article aims to provide a detailed analysis of the case, dissecting its legal intricacies and implications.
Questioning Jurisdiction under Section 147: The appellant, Captive Commerce Pvt. Ltd., questioned the assumption of jurisdiction under Section 147 of the Income Tax Act by the Assessing Officer (AO). The main issue centered around the legality of reopening a completed assessment under Section 143(3) of the Act without a well-founded ‘reason to believe’ that chargeable income had escaped assessment.
The Reassessment Order’s Vagueness: The counsel for Captive Commerce Pvt. Ltd. argued that the reassessment order was based on vague and non-descriptive reasons. According to the counsel, the criteria under Sections 147/148 were not met to warrant the reopening of the assessment case.
Lack of Concrete Evidence: Upon examining the reasons recorded by the Assessing Officer under Section 148(2) of the Act, it became clear that the assessment was reopened on insufficient grounds. The tribunal noted that there was no objective material that could give rise to a belief that income had escaped assessment. The Assessing Officer did not even provide any transaction-wise detail or mention the name of the broker involved in alleged client code modification.
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