Facts of the Case

The Petitioner, Unitech Limited, filed its return of income for AY 2008–09 declaring income of Rs.1334,87,70,381. The case was selected for scrutiny and notices under Section 143(2) were issued. During scrutiny, detailed questionnaires were raised and duly answered by the Petitioner. Thereafter, assessment under Section 143(3) was completed.

Subsequently, the Revenue issued two reassessment notices under Section 148, which were challenged and quashed by the Delhi High Court. However, liberty was granted to issue a fresh notice if legally permissible.

Pursuant thereto, the Assessing Officer issued a fresh notice under Sections 147/148 based on two grounds:

  1. Disallowance under Section 14A read with Rule 8D
  2. Alleged colourable device involving transfer of shares through subsidiaries instead of transfer of landed properties.

The Petitioner challenged the fresh notice contending that it was merely a repetition of earlier grounds and lacked statutory compliance.

Issues Involved

  1. Whether reassessment under Sections 147/148 can be initiated after four years without recording failure of full and true disclosure by the assessee?
  2. Whether reopening based on already examined material amounts to mere change of opinion?
  3. Whether repetition of previously quashed reasons can sustain fresh reassessment proceedings?

Petitioner’s Arguments

  • The Assessing Officer failed to satisfy the jurisdictional requirement under the first proviso to Section 147.
  • There was no allegation or finding regarding failure to disclose material facts fully and truly.
  • The issues forming the basis of reopening had already been disclosed during original scrutiny assessment.
  • The reassessment was merely based on reappreciation of existing material, amounting to change of opinion.
  • Reliance was placed on CIT v Kelvinator of India Ltd. to argue that reassessment requires tangible fresh material.
  • Even proceedings under Section 263 did not raise these issues, proving Revenue had earlier examined the matter.

Respondent’s Arguments

  • The Revenue argued that the fresh notice was a continuation of earlier notices and hence should be treated within limitation.
  • It was submitted that the Court had permitted issuance of a fresh notice.
  • The Assessing Officer only needed material indicating escapement of income, and sufficiency of material could not be tested at this stage.
  • The Revenue claimed the assessee had shown income under an incorrect head, amounting to failure of disclosure.

Court Findings / Observations

The Delhi High Court held:

  • Reopening after four years is permissible only when the assessee failed to fully and truly disclose material facts.
  • Such failure must be expressly recorded in the reasons for reopening.
  • In the present case, the reasons recorded did not contain any allegation of non-disclosure.
  • The assessee had fully disclosed dividend income and relevant facts during original scrutiny.
  • The Revenue had multiple opportunities to examine the matter under Sections 143(3), 263, and earlier 147/148 proceedings.
  • The fresh reasons were verbatim reproduction of earlier quashed reasons.
  • Reassessment based on same material constitutes impermissible change of opinion.

Court Order

The Delhi High Court allowed the writ petition and quashed:

  • Notice dated 4 March 2015 under Section 148
  • Order dated 9 November 2015 rejecting objections

Holding that the reassessment proceedings were invalid and contrary to the mandatory conditions under Section 147.

Important Clarification

The Court clarified that:

For reopening beyond four years:

  • Mere escapement of income is not sufficient.
  • There must be clear and specific reasons showing failure by the assessee to disclose material facts.
  • Such reasons cannot be supplemented later through objections order or affidavits.
  • Reassessment cannot be used as a review mechanism.

This judgment reinforces the principle laid down in CIT v Kelvinator of India Ltd.

Sections Involved

  • Section 147 – Income Escaping Assessment
  • Section 148 – Notice for Reassessment
  • Section 143(2) – Scrutiny Assessment Notice
  • Section 143(3) – Assessment Order
  • Section 14A – Disallowance relating to exempt income
  • Rule 8D of Income Tax Rules – Computation of disallowance
  • Section 263 – Revision of Orders Prejudicial to Revenue

Link to download the order -

https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:3826-DB/PMS24072017CW123242015.pdf

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