The Delhi High Court in a recent judgment had quashed a notice issued by Income Tax Officer under section 148 of the Income Tax Act, 1961. The Court was hearing two sets of writ petitions filed by Sabharwal Apartments Private Limited (‘SAPL’) and Sabharwal Properties Industries Private Limited (‘SPIPL’) challenging the notices issued to each of them under Section 148 of the Income Tax Act, 1961 (‘the Act’) on 28th March 2014 in respect of Reassessment Years (AYs) 2007-2008 to 2012-2013.
The main ground of challenge is that the reasons recorded for reopening the assessments under Section 148 of the Act are ambiguous and incapable of being understood. In particular, it is contended that the reasons recorded by the Assessing Officer (‘AO’) “lacks clarity and it is practically impossible to derive meaning out of it and is incapable of being understood.” It is further contended that the Additional Commissioner of Income Tax (‘Additional CIT’) had accorded approval to the said reasons without application of mind.
The bench comprising of Justice S. Muralidhar and Justice Vibhu Bakhru held that, Under Section 147 (1) of the Act, the reasons recorded for reopening an assessment should state that the Assessee had failed to disclose fully and truly all the material facts necessary for his assessment in the returns as originally filed and the reasons recorded should provide a live link to the formation of the belief that income has escaped assessment.
The bench had also quoted an apex court judgment CIT v. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC), the Supreme Court reiterated that, under Section 147 of the Act, the Assessing Officer does not have the power to reopen an assessment on the basis of ‘mere change of opinion’.
Read the Judgment here.
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