No Reassessment if Income Already Taxed at Highest Rate: Delhi HC Dismisses Revenue’s Appeal in Client Code Modification Case [Read Order]
The High Court dismissed the Revenue’s appeal, holding that reassessment is invalid when income is already disclosed and taxed at the highest rate
In a recent ruling, the Delhi High Court held that reassessment cannot be done when the assessee has already disclosed the income and paid tax at the highest rate and dismissed the Revenue’s appeal in a client code modification case.
The case involved reassessment proceedings started against Atul Goel based on information from the SFIO alleging client code modification. A notice under Section 148 was issued in November 2019. The assessee asked for details of the alleged transactions but the department did not provide them and still passed a reassessment order raising a tax demand.
The assessee challenged this before the CIT(A) who found that the income from the disputed transactions was already offered to tax at 30 percent. The CIT(A) held that no income had escaped assessment and set aside the reassessment. The ITAT also dismissed the Revenue’s appeal holding that the reassessment was without jurisdiction and based on vague information.
Before the High Court, the revenue counsel argued that the ITAT erred in rejecting the appeal and argued that the assessee failed to make full and true disclosure of the transactions. It was argued that the reassessment proceedings were valid in view of the information received from the SFIO.
The assessee argued that the disputed income was already disclosed and taxed at the highest rate. It was argued that even if the allegation of client code modification was assumed to be correct, there was no escapement of income. The assessee also relied on the findings of the CIT(A) and the ITAT to submit that the reassessment was initiated without jurisdiction.
A Bench of Justice Dinesh Mehta and Justice Vinod Kumar observed that the Assessing Officer did not refer to any specific transaction and even mentioned the wrong broker. The court observed that when the basic facts for reopening are incorrect, reassessment cannot survive. The court also observed that once tax is paid at the highest rate, the question of escaped income does not arise.
The court dismissed the Revenue’s appeal and upheld the orders passed by the CIT(A) and the ITAT.
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