AO Can’t Issue Notice Relying Upon SC’s Ashish Agarwal Ruling if Reassessment Proceedings Had Attained Finality | HC

Case Details: Akshita Jindal vs. Income Tax Officer - [2024] 162 taxmann.com 313 (Delhi)

Judiciary and Counsel Details

• • Yashwant Varma & Purushaindra Kumar Kaurav, JJ.
  • Rakesh Gupta, Somil Agarwal, Dushyant Agrawal & Prateek Bhati, Advs. for the Petitioner.
  • Shubhendu Bhattacharyya, JSC & Kunal Sharma, SSC for the Respondent.

Facts of the Case

The assessee was issued notice under section 148 for the relevant assessment year. Pursuant to said notice, the assessee filed her return. Subsequently, an assessment order under section 147 read with section 144A(b) was passed whereby an addition was made to the income of the assessee on account of the alleged accommodation entry. The assessee preferred an appeal before the CIT(A) (NFAC), which was pending for disposal till date. Meanwhile, a show cause notice under section 148A(b) was issued to the assessee.

Thereafter, an order under section 148A(d) came to be passed alleging an escapement of income substantially greater than the alleged income originally reflected in the show cause notice. A reopening notice under section 148 was also purportedly issued to the assessee with an intimation letter for the relevant assessment year.

Aggrieved by the notice, the assessee filed a writ petition before the Delhi High Court.

High Court Held

The High Court held that the solitary grievance of the assessee requires adjudication on the touchstone of the decision of the Supreme Court in the case of Union of India v. Ashish Agarwal [2022] 138 taxmann.com 64(SC), i.e., whether the Assessing Officer (AO) is legally justified in reinitiating assessment proceedings for the same assessment year, which had already been subjected to reassessment.

As is evident from the facts, the AO has issued notice under section 148A(b) on the premise that the judgment in the Ashish Agarwal case requires all notices issued under Section 148 between the period commencing from 01-4-2021 and ending on 30-6-2021 to be treated as show cause notices referable to section 148A(b). However, the said notice fails to consider that the final order had already been passed in the reassessment proceedings qua the assessee on the same alleged escapement of income.

Undisputedly, AO proceeded to pass an order under Section 148(A)(d) premised on an identical ground of escapement of income as alleged in the original notice for reassessment. It was also not the case that AO had sought to recommence the concluded reassessment proceedings based on certain new information or additional grounds for escapement of income. Rather, AO only relied upon Ashish Agarwal’s decision (supra) to wield power to proceed with the reassessment. Thus, the only question that needs to be examined is whether the Ashish Agarwal (supra) decision commands an authority to reopen even concluded assessment proceedings.

A similar challenge has been laid in the instant writ petition in the case titled Anindita Sengupta v. Asstt. CIT [2024] 161 taxmann.com 39 (Delhi), whereby it was held that the procedure envisaged in Ashish Agarwal (supra) unambiguously stood confined to matters where, although notices may have been issued, proceedings were yet to have attained finality.

The facts that assessment under section 147 was already concluded said proceedings were ignored entirely, and no new material was unearthed closely resembled the factual scenario in the case of Anindita Sengupta (supra) wherein it was held that completed assessments cannot be invalidated and reopened merely based on Ashish Agarwal case.

Therefore, the instant writ petition was to be allowed.

List of Cases Reviewed

• • Anindita Sengupta v. Asstt. CIT [2024] 161 taxmann.com 39 (Delhi) (para 19) followed.

List of Cases Referred to

• • India v. Ashish Agarwal 1 SCC 617 (para 1)
  • Cadence Builders and Construction Private Limited v. ITO & Anr. [W.P.(C) 979/2023] (para 8).