The Delhi High Court has quashed the impugned notice under Section 148 of the Income Tax Act, 1961, and held that the suspicion and conjecture cannot form a basis for triggering the reassessment proceedings.
The petitioner filed its Return on Income (ROI) which was processed under Section 143(1) of the Income Tax Act. Six years and nine months after the ROI was filed, the petitioner was served with the impugned notice by the Assessing Officer. The impugned notice was based on the reasons that income, otherwise chargeable to tax had escaped assessment.
The petitioner/assessee was called upon to file an ROI in the prescribed form within thirty (30) days. He complied with the direction issued to him and, accordingly, filed the ROI, which declared the same income that had been disclosed while filing the original ROI.
The Assessing Officer had failed to furnish the document containing “reason to believe‟, which formed the basis for triggering reassessment proceedings against the petitioner, a request in that regard was made. The request made by the petitioner was followed by two reminders.
The Assessing Officer must be wedded, which is the obligation cast on him to furnish material and information that helped him to form a belief that income, otherwise chargeable to tax, had escaped assessment. He was unaware of the ‘nature’ of the deposits in the two HDFC banks received by the petitioner.
After analyzing the facts, the division bench comprising of Justice Rajiv Shakdher and Justice Girish Kathpalla held that the Assessing Officer had no tangible material available with him to form a belief that income, otherwise chargeable to tax, had escaped assessment. The phraseology used by the Assessing Officer reveals that he “suspected” that income chargeable to tax had escaped assessment.
The Assessing Officer did not carry forward the enquiry process once he had received communication from ITO. Thus, the bench quashed the impugned notice issued to the petitioner/assessee under Section 148 of the Income Tax Act. Therefore, the writ petition was disposed of.
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