Income Tax Reassessment Based on Erroneous Facts: Supreme Court Dismisses Dept’s SLP Over 372-Day Delay [Read Judgement]

supreThe Supreme Court dismissed a Special Leave Petition filed by the Income TaxDepartment on the ground of delay, leaving intact the Delhi High Court’s decision which had quashed reassessment proceedings initiated under Section 148of the Income Tax Act, 1961.

The case arises from a judgment of the Delhi High Court in RRPR Holdings Private Limited where a Division Bench of Justice Yashwant Varma and Justice Ravinder Dudeja ruled in favour of the assessee and set aside the reassessment notice for Assessment Year 2010-11.

The Revenue department filed the Special Leave Petition challenging the High Court’s decision dated 10 September 2024, by which the reassessment notice issued under Section 148 and the consequential proceedings were quashed. The High Court had also set aside a connected protective order after allowing the main writ petition.

Before the High Court, the Revenue’s counsel argued that the loan received by RRPR Holdings from Vishwa Pradhan Commercial Pvt. Ltd. was not a genuine loan but was in fact consideration for the transfer of shares of NDTV, and on that basis, income had escaped assessment.

The High Court observed that RRPR Holdings had acquired shares of NDTV and continued to hold those shares in its own name, and that the loan amount was used to repay existing liabilities owed to ICICI Bank. The court observed that the assumption made by the Assessing Officer that the loan represented consideration for transfer of shares was factually incorrect.

The High Court explained that since the very basis for reopening the assessment was founded on incorrect facts, the “reason to believe” required under the Act could not be sustained. It held that the reassessment proceedings lacked jurisdiction and quashed the notice issued under Section 148.

The High Court further pointed out that once the primary reassessment proceedings were set aside, the connected protective order could not survive and was also liable to be quashed.

The Supreme Court Bench, comprising Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe, observed that there was a delay of 372 days in filing the Special Leave Petition and that no satisfactory explanation had been provided to condone such delay. On this ground, the court dismissed the petition without examining the merits of the case.

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