Reopening Assessment Twice on Same Issue Unconstitutional, Hits Articles 14 & 300A: Delhi HC in NDTv Founders’ Case [Read Judgment]

The Delhi High Court quashed the income tax reassessment against the founders of NDTv Dr. Prannoy Roy and Ms. Radhika Roy for AY 2009-10.

Justice Dinesh Mehta and Justice Vinod Kumar held that “subjecting the petitioner to reassessment proceedings second time for the selfsame transaction and practically for the same issue is arbitrary and without jurisdiction. They fall foul to petitioner's fundamental and constitutional rights guaranteed under Article 14, Article 19(1)(g) and Article 300A of the Constitution of India.”

The NDTv founders challenged notices dated 31.03.2016 issued under Section 148.

In Ms. Radhika Roy’s case, she had filed her return for AY 2009-10 on 31.07.2009, which was processed under Section 143(1). Subsequently, the Department reopened the assessment once earlier by issuing notice dated 25.07.2011 on the issue of NDTV share transactions with RRPR Holding Pvt. Ltd. at allegedly low consideration.

During that reassessment, the Assessing Officer also issued a Section 142(1) notice dated 06.03.2013 proposing to treat the interest-free loan received from RRPR as a deemed dividend under Section 2(22)(e).

However, while completing reassessment by order dated 30.03.2013, the AO did not make any addition on this loan issue.

Three years later, on March 31, 2016, the Department issued another Section 148 notice for the same AY 2009-10.

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This time, the Department depended on "fresh information" from RRPR's complaints and records, claiming that RRPR had taken out an interest-bearing loan of ₹375 crore from ICICI Bank at a rate of 19% and had immediately given interest-free loans to the petitioners, creating an alleged "benefit" that was taxable as income under Section 2(24)(iv).

The petitioners argued that the issue of interest-free loan was already considered in the earlier reassessment proceedings. Therefore, the second reopening was nothing but a change of opinion, impermissible in law.

The Revenue contended that earlier reopening involved Section 2(22)(e) (deemed dividend), whereas the later reopening proposed taxation under Section 2(24)(iv) (benefit/perquisite), and hence it was a different angle.

The High Court rejected the Revenue’s stand. It held that the foundational facts regarding the interest-free loan were fully within the knowledge of the AO in the first reassessment, and the petitioners had disclosed all primary facts including RRPR’s balance sheet, shareholding pattern and loan details.

The Court noted that reassessment cannot be initiated simply because someone later proposes a different legal provision for taxing the same transaction, but rather only when some new information is brought to the AO's attention that was not previously revealed.

The bench further ruled that the Department's claim that material facts were withheld in order to seek the extended statute of limitations was incorrect. The court said that the data on interest on law was already included in the audited accounts and had been presented during the earlier hearings.

According to the Delhi High Court, Section 2(22)(e) and Section 2(24)(iv) are two sides of the same coin, and once the transaction had been scrutinised earlier, the Department cannot reopen the case again for the same year on the same subject matter.

‘But merely because the new incumbents in the chair feel themselves to be wiser and they hold another opinion which their predecessor did not or could not take, an already settled assessment cannot be unsettled and the petitioner cannot be made to face the rigmarole or harassment of the assessment proceedings again and again’ said the high court.

The Court allowed both writ petitions, quashed the impugned notices dated 31.03.2016 and all consequential proceedings. It has imposed token costs of ₹1,00,000 per case on the department payable to each petitioner.

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