Facts of the Case

The batch of writ petitions was filed by Experion Developers Pvt. Ltd. and Experion Hospitality Pvt. Ltd. challenging notices issued under Section 148 of the Income Tax Act, 1961 for Assessment Years 2008-09 and 2011-12. The reassessment proceedings were initiated on the basis of information received from the Directorate of Income Tax (Intelligence & Criminal Investigation) alleging that large foreign investments received from a Singapore-based entity, M/s Gold Hotels & Resort Pte. Ltd. (“Gold Singapore”), represented income that had escaped assessment.

 Issues Involved

  1. Whether reassessment proceedings under Sections 147 and 148 were sustainable when the same foreign investment transactions were examined and accepted in subsequent assessment years.
  2. Whether the “reasons to believe” recorded for reopening survived in light of later completed assessments accepting the identity, creditworthiness, and genuineness of the investor.
  3. Whether reassessment could be justified on the basis of investigation reports without fresh tangible material.
  4. Whether reopening amounted to a mere change of opinion.
  5. Whether reassessment proceedings could continue when the very basis of suspicion stood negated by later departmental findings.

 

Petitioner’s Arguments

  • The petitioners contended that the reassessment proceedings were based on identical allegations relating to foreign share capital and share application money received from Gold Singapore.
  • It was submitted that in subsequent assessment years, including AYs 2012-13, 2015-16, and 2020-21, the Revenue had thoroughly examined and accepted the identity and creditworthiness of Gold Singapore as well as the genuineness of the transactions.
  • The petitioners argued that once the Revenue itself accepted the same transactions in later years, the foundational basis for reopening earlier years ceased to exist.
  • It was further contended that reassessment could not be sustained on mere suspicion or borrowed satisfaction from investigation reports.
  • The petitioners emphasized that the reassessment notices amounted to a change of opinion and abuse of jurisdiction under Section 147.

 

Respondent’s Arguments

  • The Revenue relied on investigation reports received from DIT (Intelligence & Criminal Investigation) and communications from Indian authorities in Singapore alleging that Gold Singapore lacked sufficient creditworthiness.
  • It was contended that the reopening was based on fresh information and that failure to disclose material facts justified reassessment beyond four years.
  • The Revenue argued that similar reassessment proceedings for AY 2012-13 had earlier been upheld by a Coordinate Bench of the High Court and the Supreme Court had dismissed the Special Leave Petition.

 

Court Order / Findings

  • The Delhi High Court observed that although reassessment proceedings for AY 2012-13 had earlier survived judicial scrutiny at the notice stage, the subsequent assessment order for that year ultimately accepted the foreign investments without any addition.
  • The Court noted that the Revenue, in multiple subsequent assessment years, had accepted the identity, creditworthiness, and genuineness of Gold Singapore and the investments made by it.
  • It was held that once the nature and source of the receipts stood satisfactorily explained and accepted by the Assessing Officer in later years, the reasons recorded for reopening earlier years lost their very foundation.
  • The Court concluded that reassessment proceedings cannot be sustained where the “reasons to believe” no longer survive.
  • Accordingly, the impugned notices issued under Section 148 and all proceedings pursuant thereto were quashed.

 

Important Clarification

The Court clarified that reassessment jurisdiction cannot be exercised mechanically or on the basis of mere suspicion. Where identical transactions have been scrutinised and accepted by the Revenue in subsequent assessment years, reopening earlier assessments on the same grounds is impermissible, as the very substratum of the “reason to believe” ceases to exist.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1770113234_EXPERIONDEVELOPERSPVTLTD.VsASSISTANTCOMMISSIONEROFINCOMETAXORS..pdf  

 

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