Facts of the Case

The Revenue preferred an appeal under Section 260A against the order dated 10.05.2025 passed by the Income Tax Appellate Tribunal, Delhi Bench “A”, which had dismissed the Revenue’s appeal and allowed the assessee’s cross-objections. The reassessment proceedings were initiated against the respondent-assessee, Atul Goel, based on reasons recorded by the Assessing Officer alleging that, pursuant to investigation by the Serious Fraud Investigation Office, the assessee was a beneficiary of Client Code Modification and had earned income that had allegedly escaped assessment.

On the basis of such reasons, a notice dated 22.11.2019 under Section 148 was issued without referring to any specific transaction or even identifying a particular broker. During reassessment proceedings, despite the assessee seeking details of the alleged transactions, the information was not supplied. The Assessing Officer nevertheless passed an order under Section 143(3) read with Section 147 making additions in respect of two transactions stated to have been carried out through M/s Anand Rathi Securities Ltd.

In appeal, the CIT(A) recorded a finding that the assessee had already offered the income arising from the said transactions to tax at the highest applicable rate of 30 percent, and therefore the reassessment proceedings and the assessment order were unsustainable. The ITAT affirmed these findings and further held that the reassessment itself was without jurisdiction.

Issues Involved

Whether reassessment proceedings initiated under Section 148 were valid when the reasons recorded were vague and based on sweeping SFIO information without identifying specific transactions or correct brokers, whether there was any tangible material to form a belief of income escapement, and whether reassessment could be sustained where the assessee had already offered the income to tax at the highest rate.

Petitioner’s Arguments

The Revenue contended that the ITAT erred in holding the reassessment proceedings to be without jurisdiction and argued that the assessee had failed to make full and true disclosure of material facts relating to the impugned transactions. It was submitted that the information received from the SFIO constituted sufficient material to reopen the assessment.

Respondent’s Arguments

The assessee submitted that both the CIT(A) and the ITAT had correctly found that the income arising from the transactions had already been offered to tax at the highest rate under the head “income from other sources”. It was argued that even assuming the allegation of Client Code Modification to be correct, no income could be said to have escaped assessment. The assessee further submitted that the reasons recorded by the Assessing Officer did not mention any specific transaction, broker, or company, and therefore lacked the foundational facts necessary to assume jurisdiction under Section 147.

Court Order / Findings

The Delhi High Court observed that the CIT(A) and the ITAT were justified in holding that the initiation of reassessment proceedings was without application of mind and unsustainable. The Court noted that there was no tangible material or evidence with the Assessing Officer, and even in the reasons recorded, neither the name of any company nor the correct name of the broker was mentioned. The Court held that when the foundational facts forming the basis for assumption of jurisdiction are non-existent or erroneous, the reassessment proceedings cannot meet the test of reasonableness and prudence.

The Court further held that the assessee had already paid tax on the disputed transactions at the highest applicable rate, and therefore any question of undisclosed income or escapement of income did not arise. In such circumstances, the reassessment proceedings were held to be without jurisdiction and bad in law.

Important Clarification

The High Court clarified that reassessment proceedings must be founded on specific and tangible material demonstrating escapement of income. Vague and sweeping information, without identification of transactions or parties, cannot confer jurisdiction under Section 147. Where the assessee has already offered the income to tax at the highest rate, reassessment on the same income is impermissible.

Final Outcome

The appeal filed by the Revenue was dismissed. The order of the ITAT quashing the reassessment proceedings was upheld, and the reassessment initiated against the assessee was held to be without jurisdiction and unsustainable in law.

 

Link to download order https://www.mytaxexpert.co.in/uploads/1769504089_PR.COMMISSIONEROFINCOMETAX7DELHIVsATULGOEL.pdf

Disclaimer

This content is shared strictly for general information and knowledge purposes only. Readers should independently verify the information from reliable sources. It is not intended to provide legal, professional, or advisory guidance. The author and the organisation disclaim all liability arising from the use of this content. The material has been prepared with the assistance of AI tools.