In a recent ruling, the Delhi High Court allowed the writ petition, and the court was of the view that the reopening of the assessment did not meet the legal requirements under Sections 147 and 148 of the Income Tax Act, 1961.
In this case, the petitioner, Well Trans Logistics India Pvt. Ltd., is involved in the business of freight forwarding. The Income Tax Returns for the Assessment Year.
The petitioner company filed its return of income for the Assessment Year (AY) 2011-12 on 30.09.2011. The assessment was reopened under Section 147 of the Income Tax Act.
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The respondent solely relied on a letter dated 29.11.2013 from the Deputy Director of Income Tax (DDIT) and formed a reason to believe that income from cash deposits in the petitioner’s bank account escaped assessment. The petitioner filed objections, claiming that the reopening was based solely on the DDIT’s letter without independent judgment from the Assessing Officer (AO) and that the cash was part of accounted income.
The objections were disposed of, and thus the petitioner filed the writ petition challenging the notice issued under Section 148 of the Income Tax Act, 1961.
The counsel for the petitioner contended that the assessing officer (AO) had relied solely on information from the DDIT without providing independent reasoning or applying their own judgment in forming the belief.
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The court observed that the power to reopen an assessment under Section 147 of the Income Tax Act, 1961, is potent in nature and must not be exercised lightly, casually, or mechanically.
The bench further observed that there is no close nexus between the tangible material and the reason to believe that income has escaped assessment. The information from the Revenue’s Investigating Unit alone cannot justify such a belief.
The bench was of the view that it was incumbent on the part of the AO to conduct further inquiries and gather additional material to form a valid belief of escaped income.
The bench, comprising Justice Yashwant Varma and Justice Ravinder Dudeja, allowed the writ petition and held that there was not even a line of reason to justify the formation of the belief. The court was satisfied that the reopening did not meet the legal requirements under Sections 147 and 148 of the Income Tax Act, 1961.
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