Facts of the Case

The petitioner, Aarti Fabricott Private Limited, is a company registered with the Registrar of Companies and a regular income-tax assessee. For Assessment Year 2017–18, it filed its return of income on 30 October 2017, declaring a total income of ₹4,36,709.

On 28 June 2021, a notice under Section 148 of the Income Tax Act, 1961 was issued proposing reassessment on the allegation that income had escaped assessment. The said notice was subsequently quashed by the Delhi High Court. Thereafter, pursuant to the judgment of the Supreme Court in Union of India v. Ashish Agarwal, the proceedings were revived and a show-cause notice under Section 148A(b) was issued on 24 May 2022.

The petitioner filed a detailed reply on 07 June 2022, stating that it had not sold any immovable property during the relevant assessment year and therefore no long-term capital gains had arisen. It was further clarified that the petitioner had purchased an immovable property for ₹1,81,00,000 from Mr. Vinod Popli vide registered sale deed dated 18 May 2016, and that it had no transaction of ₹1,16,00,000 with Mr. Sunil.

After examining the reply and audited accounts, the Assessing Officer passed an order under Section 148A(d) dated 30 July 2022, concluding that the case was not fit for issuance of notice under Section 148, and the reassessment proceedings were dropped.

However, on the same date, a corrigendum was issued reversing the earlier conclusion and reopening the reassessment proceedings by issuing a notice under Section 148, which led to the present writ petition.

Issues Involved

Whether reassessment proceedings can be validly initiated by issuing a corrigendum reversing an order passed under Section 148A(d), without any fresh tangible material, and whether such reopening amounts to an impermissible change of opinion.

Petitioner’s Arguments

The petitioner contended that once reassessment proceedings had been consciously dropped after due consideration of records and submissions, they could not be revived by issuing a corrigendum on the same material. It was argued that the impugned action amounted to a mere change of opinion, which is impermissible in law.

The petitioner further submitted that reliance on audit objections does not constitute fresh tangible material and that the Assessing Officer has no power to review its own decision under the guise of reassessment.

Respondent’s Arguments

The Revenue argued that the reassessment was justified on the basis of objections raised by the audit party and that mere denial of transactions by the assessee was insufficient. It was contended that the Assessing Officer was required only to form a prima facie belief of escapement of income and that sufficiency of reasons could not be examined in writ jurisdiction.

Court Order / Findings

  • Reassessment under Sections 147 and 148 requires fresh tangible material having a live nexus with the formation of belief regarding escapement of income.
  • Audit objections, by themselves, cannot justify reopening without independent application of mind by the Assessing Officer.
  • Issuing a corrigendum reversing an earlier reasoned order passed under Section 148A(d), on the same material, amounts to an impermissible review.
  • Such reopening is nothing but a change of opinion, which is barred in law in view of the principles laid down in CIT v. Kelvinator of India Ltd. and CIT v. Techspan India Pvt. Ltd.

Important Clarification

The Court clarified that the power of reassessment cannot be exercised as a power of review. Any attempt to reopen concluded proceedings without new tangible material violates the statutory safeguards under the Income-tax Act and undermines certainty and finality in tax administration.

Final Outcome

The writ petition was allowed. The Delhi High Court quashed the notice issued via corrigendum dated 30 July 2022 along with all consequential proceedings, holding that the reassessment was initiated without fresh tangible material and was based solely on a change of opinion, rendering it invalid in law.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1772175832_AARTIFABRICOTTPRIVATELIMITEDVsINCOMETAXOFFICERWARD11DELHIANR..pdf  

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