Delhi High Court rejects re-assessment notice

Delhi High Court rejects re-assessment notice

It viewed that the petitioner had not deliberated on escaping tax on income

In a recent move, the Delhi High Court has quashed a re-assessment notice on the grounds that there was no rational nexus or reason to believe that under the provisions of the Income Tax Act, 1961, there was no escapement of income.

The petitioner, Kurz India Private Limited had challenged the re-assessment notice before the high court stating that the reopening of the assessment was done, as it had claimed a deduction of Rs.1,54,05,798, even though no such claim was made earlier.

The IT department submitted before the high court that the assessing officer (AO) wanted to ascertain how the liability on account of statutory forms – the Central Sales Tax had increased from Rs.1,17,51,217 in the last financial year to Rs.1,51,05,798 in the current financial year.

The bench comprising Justice Manmohan and Justice Sudhir Kumar held, "The reason is invalid and has no rational nexus to the belief for escapement of the income and there was no fresh material on record to initiate the reassessment proceedings."

The court ruled, "No useful purpose would be served by giving an opportunity to file a counter-affidavit. Accordingly, the request of the counsel for the respondent is declined. The impugned notice of March 2021 and the order disposing of objections of December 2021 are quashed."

It, however, added that if the AO came up with some fresh material, he would be at liberty to take action in accordance with the law. In such a scenario, the petitioner would also be at liberty to file appropriate proceedings.