Delhi HC sets aside Reassessment Order under Income Tax Act Triggered without valid Reason [Read Order]

The Delhi High Court set aside reassessment under section 147 of the Income Tax Act, 1961 triggered based on the change in opinion about the nature of the transaction.

Shourya Estates Pvt Ltd, the petitioner prayed to quash the notice issued under Section 148 of the Income Tax Act, 1961 [“Act”] and to quash the order whereby objections filed by SEPL concerning reopening its assessment were rejected.

The objections preferred by SIPL were directed against the initiation of the reassessment proceeding by the AO under Section 147 of the Income Tax Act, 1961 [“Act”]. The issue for consideration in the instant matter is whether the AO correctly triggered the reassessment proceeding qua SIPL.

SIPL is in the real estate business, including constructing, buying, and selling immovable properties. SIPL was incorporated in 2006. Upon the petitioner filing its Return of Income (ROI) for the AY in issue, the AO took it up for scrutiny under Section 143(3) of the Act.  

SIPL was issued various notices, which were accompanied by questionnaires. These notices are dated 02.09.2013, 14.10.2013 and 23.10.2013. SIPL was required to furnish information about the aforesaid aspects, including a transaction relating to the sale of land, qua which it had received consideration of Rs. 1,51,00,000/-. 

SIPL indicated to the AO that although it had purchased the land, the funds were provided by a group company named Shourya Towers Pvt. Ltd. [“STPL”]. According to SIPL, the arrangement was the subject matter of a Memorandum of Understanding (MoU)/agreement dated 02.03.2007 [“MOU/agreement”] entered between itself and STPL.     

It was viewed that the AO sought to draw fresh inferences, which it could have raised when he framed the original assessment order regarding the loan transaction based on the material placed before him. Therefore, the fresh information in that case, as observed by the Court, exposed the falsity of the statement made on behalf of the appellant/assessee when the original assessment order was framed.    

A division bench of Justice Rajiv Shakdher and Justice Anish Dayal following the order of sister concern of the petitioner, allowed the writ petition.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates