Case Law Details
JHM Developers Pvt Ltd Vs ITO (ITAT Delhi)
In the case of JHM Developers Pvt Ltd Vs ITO (ITAT Delhi), the assessee challenged the validity of the reopening of assessment for the assessment year 2011-12 under section 148 of the Income-tax Act, 1961. The reopening was initiated by the Assessing Officer (AO) solely for verifying transactions related to the sale of shares amounting to Rs. 26.95 lakh and a commission addition of Rs. 26,950. The AO’s action was based on the need to verify a total of Rs. 57.70 lakh worth of transactions. However, this purpose of reopening was contested by the assessee, and the validity of such action became the focal point of the appeal.
The Income Tax Appellate Tribunal (ITAT) observed that the reopening of the assessment under section 148/147 was initiated purely for the purpose of verification of these transactions, without any tangible evidence or material suggesting income had escaped assessment. Relying on previous judgments in PCIT v. Manzil Dinesh Kumar Shah (2018) and PCIT v. Maheshwari Devi (2023), the ITAT concluded that reopening proceedings for the sole purpose of verification, without a substantive reason to believe that income had been under-assessed, is not legally valid. Consequently, the ITAT quashed the reopening of the assessment, rendering all related proceedings and additions, including the ones concerning the sale of shares and commission, as legally invalid.
As a result, the appeal filed by JHM Developers Pvt Ltd was allowed, and the reopening of the assessment was struck down. The ruling reinforces the principle that reopening under section 148 cannot be used merely as a tool for verification without substantial evidence, ensuring that taxpayers are protected from arbitrary or unjust assessments. The matter concerning the merits of the additions was left unresolved, as the primary issue of reopening was quashed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This assessee’s appeal for assessment year 2011-12 arises against National Faceless Appeal Centre (INFAC), Delhi’s DIN and order no. ITBA/NFAC/S/250/2023-24/1060991733(1), dated 15.02.2024 in case no. CIT(A), Delhi-5/10283/2018-19 in proceedings u/s 250 of the Income-tax Act, 1961, in short the “Act”.
Heard both the parties at length. Case file perused.
2. Coming to the assessee’s legal plea challenging validity of the impugned reopening itself culminating in corresponding additions from sale of shares of Rs. 26.95 lakhs and section 69C commission addition on estimation to the tune of Rs. 26,950/-, it emerges from a perusal of the Assessing Officer’s discussion at page 3 that he had set into motion section 148/147 in order to verify the corresponding transactions of Rs. 57.70 lakhs. This clinching fact has gone unrebutted from the Revenue’s side.
3. Faced with this situation, I hereby quote PCIT v. Manzil Dinesh Kumar Shah (2018) 406 ITR 306 (Guj.) and PCIT v. Maheshwari Devi (2023) 454 ITR 755 (Jharkhand) to conclude that such a recourse to 148/147 proceedings for the purpose of verification only is not sustainable in law. The impugned reopening stands quashed in very terms.
All other pleadings on merits stand rendered academic.
4. This assessee’s appeal is allowed in above terms.
Order pronounced in open court on 21.11.2024.
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