PCIT-1 Vs East Delhi Leasing Pvt. Ltd. (Delhi High Court)
Delhi High Court held that principle enunciated in the criminal jurisprudence in respect of a ‘proof beyond reasonable doubt’ was erroneously applied to section 148 of the Income Tax Act. Thus, order based on incorrect application of principle is liable to be quashed.
Facts- The question of law involved in the present case is whether the ITAT was not wrong in applying the principles enunciated by the SC in a criminal case where the discharge of burden of proof is beyond reasonable doubt, to the principle of “reason to believe” as provided in section 148 of the Act?
Conclusion- Hon’ble Supreme Court in Deputy Commissioner of Income Tax v. M.R. Shah Logistics, held that the basis for a valid reopening of assessment should be availability of tangible material, which can lead the AO to scrutinise the returns for the previous assessment year in question, to determine, whether a notice under section 147 is called for. Predicated on the aforesaid judgments it can be safely inferred that the concept of burden of proof beyond reasonable doubt is not to be applied in cases such as the present one.
This is for the reason that the learned ITAT misdirected itself in predicating its entire reasoning on an incorrect and inapplicable principle of law, which are confined to purely penal provisions, which is not the case here. Thus, on this error alone the impugned judgement is found to be unsustainable in law. Once the edifice of differentiating “reason to suspect” and “reason to believe” itself is on incorrect application of the principle as explained above, the consequential appreciation on merits too would suffer the same fate.
