Author: Khushi J. Prajapati
The Delhi High Court held that income tax reassessment can only be initiated if a financial transaction that is liable to be taxed has escaped assessment.
The court examined the issue of legality in respect of a reassessment notice delivered under section 148 of the Income Tax Act, 1961. The Assessing Officer (AO) was said to have failed to meet the legal requirements for reopening an assessment.
The court determined that the initial reasons provided by AO for reassessment were founded on wrong assumptions and, hence didn’t possess any proper factual basis. In his main return, had already disclosed all relevant tax residency information including clarifications regarding his status and relevance of tax treaties applicable to him as well as his expected income.
The court quashed the contested reassessment notice and the respective orders, stating that the AO had acted beyond the legal limits of reassessment. The court supported the applicant’s contention that there was no basis for the reassessment, allowing for the initiation of new proceedings if justified by law.
Facts
In Banyan Real Estate Fund Mauritius v. CIT, the petitioner who is a Mauritian fund received a notice from the Income Tax Act of India regarding his/her income tax returns for 1961. This occurred because he/she failed to declare his/her income derived from non-resident transactions and outsourcing for shares.
The petitioner argued that he/she correctly declared his/her share sale income and availed himself/herself of exemptions under the Double Tax Avoidance Agreement with others. Even though there were comprehensive explanations and supporting documents provided by the petitioner; however, the Assessing Officer continued with reassessment proceedings which were challenged in court on grounds of absence of any tangible material or wrong application of law.
Case Details
Case Name: Banyan Real Estate Fund Mauritius v. CIT
Court: Delhi High Court
Judgment Date: August 5, 2024
Case Number: W.P.(C) 10485/2023 and CM Appl.40642/2023
Judges: Justice Yashwant Varma, Justice Ravinder Dudeja
Counsel for Petitioner: Mr. Balbir Singh, Sr. Adv. with Mr. Shyam Gopal, Mr. Karan Sachdev and Ms. Pragya Kaushik, Advs.
Counsel for Respondent: Mr. Puneet Rai, SSC along with Mr. Ashvini Kumar and Mr. Rishabh Nangia, JSCs.
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