Court questions jurisdictional basis for reopening assessment based on previously disclosed income; proceedings stayed pending further review.
In a significant development, the Delhi High Court has stayed the reassessment notice issued by the Deputy Commissioner of Income Tax (DCIT) against Kapoor Industries Limited. The notice, pertaining to the Assessment Year 2024-25, sought to reopen the assessment of an income of Rs. 17.66 crore, which had already been disclosed and taxed.
The bench, comprising Justice Dinesh Mehta and Justice Dr. Aditi Choudhary, found the reassessment notice under Section 148 of the Income Tax Act, 1961, to be prima facie without jurisdiction. The court observed that the cash amount found during a search at the premises of Ashish Kapoor, a director of Kapoor Industries, had already been disclosed by the company as part of its income and was offered for taxation. Furthermore, the Income Tax Appellate Tribunal had previously directed the adjustment of this amount against the company's tax liabilities.
The court questioned the rationale behind reopening the assessment, noting that the same Assessing Officer had previously accepted that the seized amount belonged to Kapoor Industries when assessing Ashish Kapoor's income. The bench expressed skepticism over the claim of income escapement, considering the amount had been processed under Section 143(1) and the facts were well within the knowledge of the Assessing Officer.
Mr. Sachit Jolly, senior advocate for Kapoor Industries, argued that the notice was a misuse of power intended to harass the company. He pointed out that the tribunal had already ruled in favor of the company, directing the refund of the seized amount after tax adjustments.
On the other hand, Mr. Puneet Rai, representing the tax department, contended that the notice was issued following a search and that the usual reassessment principles did not strictly apply. He argued that the ownership of the cash by Kapoor Industries was not conclusive evidence of proper income declaration.
The court, while granting six weeks for the department to file a reply, has stayed further proceedings related to the notice. The case is scheduled for final hearing on December 15, 2026.
This decision underscores the importance of jurisdictional accuracy in tax reassessment processes, particularly when previously disclosed incomes are involved. It also highlights the judiciary's role in scrutinizing the exercise of power by tax authorities to prevent harassment of taxpayers.
Bottom Line :
Income Tax - Notice under Section 148 issued after search for AY 2024-25 stayed - Where seized cash had already been disclosed by petitioner-company in its return, offered to tax, directed by Tribunal to be adjusted as self-assessment tax, and same Assessing Officer had accepted in assessment of searched person that amount belonged to petitioner-company, subsequent reopening alleging escapement of same income was prima facie without jurisdiction and lacked jurisdictional foundation.
Statutory provision(s):
Sections 148, 143(1), 143(3), 133(6), 153C, Explanation 2(iii) to Section 148 of the Income Tax Act, 1961
