Delhi High Court Stays ₹17.66 Crore Reassessment After Same AO Accepted Siezed Cash Belonged To Company
The Delhi High Court has stayed ₹17.66 crore reassessment proceedings initiated against a company, noting that the same amount had already been accepted by the Assessing Officer as belonging to the company and had been offered to tax as cash sales.
The Division Bench of Justices Dinesh Mehta and Aditi Choudhary was hearing a petition challenging a notice issued under Section 148 of the Income Tax Act, 1961, for Assessment Year 2024-25.
The case arose from a search conducted on May 12, 2024 at the premises of Ashish Kapoor, a director of the Petitioner-company. During the search, ₹17.66 crore in cash was found in lockers belonging to Kapoor and one Shakun Tamang.
Kapoor subsequently disclosed that the cash belonged to Petitioner-company and represented its sale proceeds. The company also disclosed the amount as cash sales in its income-tax return and offered it to tax. It requested that the seized amount be treated as self-assessment tax or adjusted against its tax liability.
The company's return was processed under Section 143(1). However, the credit or adjustment of the self-assessment tax was not given. ITAT subsequently accepted the company's plea and directed the Assessing Officer to refund the ₹17.66 crore after adjusting the total tax liability.
Meanwhile, the scrutiny assessment of Ashish Kapoor was completed under Section 143(3) and the same Assessing Officer who later issued the impugned notice had accepted during those proceedings that the ₹17.66 crore belonged to Petitioner-company and had accepted his returned income.
Before the High Court, the company argued that after the amount had been accepted as belonging to it and had been offered to tax, the same amount could not subsequently be treated as income that had escaped assessment.
The Income Tax Department however submitted that the notice was issued pursuant to the search and that the fact that the amount belonged to the company was not by itself conclusive of whether it had been correctly offered as income.
Remarking that the facts of the case were “rather startling”, the High Court noted that the amount had been offered by Kapoor as belonging to the company, that the company had itself declared it as cash sales, and that the ITAT, as the final fact-finding authority, had accepted the company's plea and directed the amount to be treated as self-assessment tax.
It further noted that the fact that the amount belonged to Petitioner-company had been accepted by the very same Assessing Officer while framing Kapoor's assessment as recently as March 27, 2026.
“Such being the position, now taking the plea, that though this amount belongs to Kapoor Industries Limited but still the income to the tune of Rs.17,66,50,000/- has escaped assessment... simply because petitioner's assessment was made under Section 143(1) of the Act of 1961 cannot be countenanced,” it observed.
The Court also questioned why the Assessing Officer had not taken up the company's assessment earlier, particularly when its case had been centralised following the search and the director himself had attributed the cash to the company.
Holding that the matter required consideration, the Court issued notice to the Department and granted six weeks to file its reply.
Meanwhile, it stayed proceedings pursuant to Section 148 notice and listed the matter for final hearing on December 15.
For Petitioner: Senior Advocate Sachit Jolly, with Advocates Mansha Anand, Sohum Dua, Abhyudaya Shankar Bajpai, Saloni Ray, Ghunaim Siddiqui, Yahavi Sharma and Manvi.
For Respondents: Senior Standing Counsel Puneet Rai, with Junior Standing Counsels Ashvini Kr. and Rishabh Nangia, and Advocate Nancy Jain; Senior Panel Counsel for Union of India/Respondent No. 3 Akhil Mittal, with Advocates Shayna Das Pattanayak and Riddhi Jain.