High Court of Delhi was dealing with the petition filed challenging the impugned notice dated 28th March, 2021 issued under Section 148 of Income-tax Act, 1961 for the assessment year 2015-16.
Petitioner’s Contention:
Learned counsel for the petitioner submitted that reopening of assessment was done on the sole ground that the petitioner has made a claim of deduction of Rs.1,54,05,798/-; when, in fact, no such claim has ever been made. He stated that the Petitioner had only claimed expenses as mentioned in Notes 18 to 23 to the audited accounts. He pointed out that it is apparent from the audited profit & loss account that the petitioner has not made any claim of contingent liabilities as revenue expense.
He stated that the same was disclosed by way of a written note in accordance with the requirements of applicable Accounting Standards i.e., AS-29. It was also submitted that reopening is initiated on the basis of review and re-appreciation of the same material i.e., audited accounts which were subject to verification in the course of original assessment proceedings under Section 143(3) which is not permissible in law.
HC’s Observations:
After hearing both the sides Court stated that the order dated 27th December, 2021 disposing of the objections filed by the petitioner does not deal with any of the contentions or submissions advanced by the petitioner. HC stated that the impugned order is based on the premise that the contingent liability has been claimed as revenue expense.
HC opined that the said reason is contrary to the facts as well as to the concept of contingent liability which is only required to be disclosed by way of a note in accordance with the requirement of applicable Accounting Standards. HC observed that the impugned order disposing objections dated 27th December, 2021 also suffers from complete non-application of mind, as there are a lot of repetitions in the impugned order.
HC Held:
After evaluating submissions made by both the parties the Court held that “the reason to believe is invalid and has no rational nexus to the belief for escapement of income and there was no fresh material on record to initiate re-assessment proceedings. No useful purpose would be served by giving an opportunity to file a counter affidavit. Accordingly, the said request of learned counsel for the respondent is declined and the impugned notice dated 28th March, 2021 and the order disposing objections dated 27th December, 2021 are quashed.”
Bench: Hon'ble Mr. Justice Manmohan and Hon'ble Mr. Justice Sudhir Kumar Jain
Case Title: Kurz India Private Ltd. v. Principal Commissioner of Income Tax-5, New Delhi & Ors.
Case Details: W.P.(C) 1409/2022 & CM APPL.4052/2022
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