The Delhi High Court recently ruled that an income tax assessment cannot be reopened under Section 148 of the Income Tax Act without new material evidence and quashed the reassessment proceedings initiated for the Assessment Year 2015-16.
The petitioner challenged the reassessment on the grounds that it was time-barred under the First Proviso to Section 149(1) of the Act. The court noted that the reassessment notice issued in July 2022 was beyond the permissible time limit, and there was no new material or evidence that could justify the reopening of the assessment.
The reassessment proceedings had been initiated based on information already available during the original assessment, which does not qualify as new material. The High Court further emphasised that reopening of assessments must be based on fresh evidence or materials that suggest income has escaped assessment.
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The petitioner contended that since no such new evidence was provided, the reassessment action could not be sustained.
The Delhi High Court Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja observed that reopening of past assessments without substantive new information is not permissible, maintaining the integrity of time-barred protections under the Income Tax Act. The ruling also highlighted the procedural safeguards introduced by the Finance Act, 2021, which require strict adherence to protect the rights of taxpayers.
The Bench noted that, “We also bear in mind that no fetter operated upon the AO to take remedial steps and follow or adopt the procedure as prescribed by Section 148A prior to 31 March 2022. This aspect assumes added significance in light of the writ petitioner itself having drawn the respondents attention to the amended procedure for reassessment. Thus, even though the AO was duly apprised and placed on notice of the aforesaid aspects, it failed to take any corrective action.”
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It was thus held that, “for all the aforesaid reasons, we allow the instant writ petition and quash the impugned notice referable to Section 148A(b) of the Act dated 27 May 2022, order under Section 148A(d) of the Act dated 30 July 2022, notice referable to Section 148 of the Act dated 30 July 2022 and all consequential proceedings thereto.”
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