Reopening of Closed Assessment which had reached Culmination: Delhi HC quashes Income Tax Notice [Read Order]

The Delhi High Court quashed income tax notice on the ground of reopening of closed assessment which had reached culmination.

Via the instant writ petition, a challenge is laid to the order dated 19.07.2022 passed under Section 148A(d) of the Income Tax Act, 1961. Besides this, the petitioner also sought to assail the consequential notice of even date, i.e., 19.07.2022, issued under Section 148 of the Income Tax Act. Both the impugned order and notice concern Assessment Year (AY) 2015-16. The record showed that the principal allegation against the petitioner is that he is a beneficiary of accommodation entries provided by, one, Mr Rajnish Garg.

In this context, it is alleged that the petitioner was a beneficiary of Rs.50,94,24,738/- which, according to the respondents/revenue, stood credited in the bank accounts maintained with HDFC Bank and DCB Bank in the period in issue, i.e., Financial Year (FY) 2014-15 (AY 2015-16). The record showed that this allegation was embedded in the notice dated 31.03.2021 issued to the petitioner under Section 148 of the Income Tax Act, i.e., under the old regime, which obtained prior to the Finance Act 2021 [in short, “F.A. 2021”] being in force.

Continuing with the narrative, the petitioner was issued thereafter a notice under Section 142(1) of the Income Tax Act. This was followed by a show cause notice-cum-draft assessment order dated 12.03.2022 being served on the petitioner. A perusal of the said show cause notice- would show that a proposal to add Rs.50,94,24,738/- to the income of the petitioner (based on the allegations which were contained in the notice dated 31.03.2021) was made under Section 148 of the Income Tax Act.

A Division Bench of Justices Rajiv Shakdher and Girish Kathpalia observed that “Thus, without any actionable material, the AO embarked on a journey to reopen, in a sense, a closed assessment which had reached culmination via order dated 22.03.2022, at least at the point in time when notice under Section 148A(b) of the Income Tax Act was issued.”

“It is ordered accordingly. The impugned order dated 19.07.2022 passed under Section 148A(d) and the consequential notice of even date, i.e., 19.07.2022, issued under Section 148 of the Act shall stand quashed” the Court concluded.

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