Delhi High Court Rejects ₹50.56 Crore Reassessment Additions For Want Of New Material

The Delhi High Court on 19 August held that the Revenue cannot revisit tax issues already considered while framing an assessment under Section 143(3) of the Income Tax Act, 1961, in reassessment proceedings unless new information or material comes to the notice of the Assessing Officer.

A Division Bench comprising Justices Dinesh Mehta and Rajneesh Kumar Gupta made the observation while dismissing the Revenue's appeal against an order of the Income Tax Appellate Tribunal (ITAT) deleting two additions made during reassessment proceedings, one of Rs. 8,48,89,345 and the other of Rs. 42.08 crore. It observed:

“Firstly, as found by the appellate authorities this amount has been considered and secondly, it is purely a finding of fact concurrently held by two authorities below…”

The first addition of Rs. 8.48 crore related to alleged bogus construction expenses.

The Revenue submitted that the Assessing Officer had initiated reassessment proceedings based on information received from arbitration proceedings, which indicated that Rs. 8,48,89,345 had been paid towards bogus construction expenses and had not formed part of the assessment earlier completed under Section 143(3) of the Income Tax Act. It contended that the ITAT had erred in treating the addition as a case of double addition.

The High Court, however, noted that both the Commissioner of Income Tax (Appeals) [CIT(A)] and the ITAT had concurrently found that the Rs. 8.48 crore amount had already been assessed to tax or considered while framing the original assessment under Section 143(3), in the context of capital gains. It therefore found no basis to interfere with the concurrent factual findings recorded by the appellate authorities.

The second addition of Rs. 42.08 crore concerned an alleged fictitious long-term capital loss arising from the sale of shares.

The Revenue argued that the issue had come to the Assessing Officer's notice during the reassessment proceedings and could therefore be assessed under the Explanation to Section 147 of the Income Tax Act, which deals with income that comes to the Assessing Officer's notice during reassessment proceedings.

The High Court rejected this contention, noting that both the ITAT and CIT(A) had found that no new information or material had come to the notice of the Assessing Officer and that the issue had already been considered while passing the original assessment order under Section 143(3). The judges held:

“We do not find any error in the orders of the Appellate Authorities in this regard as well,”

Accordingly, the High Court dismissed the Revenue's appeal and upheld the ITAT's order deleting both additions.

For Appellant: Mr. Puneet Rai, SSC with Mr. Ashwini Kumar & Mr. Rishabh Nangia, JSCs.