Facts of the Case

The petitioners, Ms. Radhika Roy and Dr. Prannoy Roy, were directors and 50% shareholders of RRPR Holding Private Limited. For Assessment Year (AY) 2009-10, Ms. Radhika Roy filed her return of income declaring ₹1,66,61,534, which was processed under Section 143(1) of the Income-tax Act, 1961.

Subsequently, the assessment was reopened under Sections 147/148 on the issue of alleged undervaluation in transactions involving NDTV shares. During the reassessment proceedings, the Assessing Officer issued a notice under Section 142(1) proposing to treat interest-free loans received from RRPR as deemed dividend under Section 2(22)(e).

The petitioners produced complete books of accounts, balance sheets, and explanations. The reassessment culminated in an order dated 30.03.2013 under Section 147 read with Section 143(3), wherein no addition was made on account of the interest-free loans.

After a lapse of three years, a fresh notice dated 31.03.2016 under Section 148 was issued for the same AY, proposing to tax the notional interest on the same interest-free loans as deemed income under Section 2(24)(iv), relying upon complaints and internal examination of RRPR records.

Issues Involved

  1. Whether reassessment proceedings under Section 148 can be initiated again for the same assessment year on the same material already examined earlier.
  2. Whether such reopening amounts to a mere change of opinion.
  3. Whether extended limitation could be invoked on the allegation of failure to disclose material facts.
  4. Whether interest-free loans already scrutinised could be reassessed under a different provision of law.

Petitioner’s Arguments

The petitioners contended that:

  • All primary facts, including receipt of interest-free loans, were fully and truly disclosed during earlier reassessment proceedings.
  • The very issue of interest-free loans was specifically examined and consciously dropped by the Assessing Officer.
  • The impugned notice was based solely on a change of opinion, which is impermissible in law.
  • No new tangible material had surfaced to justify reopening.
  • Invocation of extended limitation was arbitrary, as there was no failure to disclose material facts.
  • Repeated reassessment on the same transaction amounted to harassment and abuse of statutory power.

Respondent’s Arguments

The Revenue argued that:

  • Fresh information in the form of complaints and scrutiny of RRPR records revealed that RRPR had borrowed funds at interest and advanced them interest-free to directors.
  • Earlier proceedings considered Section 2(22)(e), whereas the present reassessment proposed addition under Section 2(24)(iv), which constituted a distinct legal provision.
  • The petitioners had not disclosed the deemed benefit arising from non-charging of interest.
  • The writ petitions were premature as the petitioners had not responded to the reassessment notice.

Court Order / Findings

The Delhi High Court held that:

  • The interest-free loans were a foundational fact already within the knowledge of the Assessing Officer during the earlier reassessment.
  • All relevant documents, including audited balance sheets and books of RRPR, were examined earlier.
  • Reopening assessment on the same transaction under a different provision amounts to a mere change of opinion.
  • Section 147 cannot be invoked repeatedly to revisit concluded assessments merely because a different inference is sought to be drawn later.
  • There was no failure on the part of the petitioners to disclose primary facts; hence, extended limitation under Section 149 was wrongly invoked.
  • Complaints do not constitute “new tangible material” when the issue was already examined.
  • The reassessment proceedings were arbitrary, without jurisdiction, and violative of Articles 14, 19(1)(g), and 300A of the Constitution.

Accordingly, the impugned notices dated 31.03.2016 and all consequential proceedings were quashed, and costs of ₹1,00,000 per case were imposed on the Revenue.

Important Clarification / Legal Principle

  • An assessee is required to disclose only primary facts, not the inferences or legal conclusions arising therefrom.
  • Reassessment cannot be initiated merely because the Assessing Officer now seeks to apply a different provision to the same set of facts.
  • Sections 2(22)(e) and 2(24)(iv), though distinct, operate on the same factual substratum; once examined, the matter cannot be reopened.
  • Reassessment based on change of opinion is impermissible, as reaffirmed by the Supreme Court in New Delhi Television Ltd. and TechSpan India Pvt. Ltd.

Final Outcome of the Case

·         The Delhi High Court allowed both writ petitions filed by Ms. Radhika Roy and Dr. Prannoy Roy and held that the reassessment proceedings were illegal, arbitrary, and without jurisdiction.

Source Link- https://www.mytaxexpert.co.in/uploads/1768822099_RadhikaRoyDr.PrannoyRoyv.DCITDelhiHC.pdf

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