The Delhi High Court has quashed the reassessment proceedings after four-year limit on the ground that full disclosure of prior year salary expenses.
The bench of Justice Vibhu Bakhru and Justice Tejas Karia has observed that the petitioner had expressly disclosed in its accounts, which were furnished in support of its return that the expenses booked under the head ‘wages and salaries’ included Rs. 6.29 crores on account of salaries and wages, which pertain to prior financial years. Thus, no proceedings for initiation of reassessment could have been initiated under the provisions relating to reassessment that were in force prior to 01.04.2021 after expiry of four years from the end of the relevant assessment year.
The petitioner/assessee filed its return of income by declaring a loss. The petitioner’s return of income was selected for scrutiny and the Assessing Officer issued a notice under Section 143(2) of the Income Tax Act. The AO also issued further notices during the course of the assessment proceedings, which were duly responded to by the petitioner. The assessment proceedings culminated in an assessment order.
The AO issued a notice under Section 154 read with Section 155 of the Income Tax Act, inter alia, stating that there was a mistake apparent from the record, which was proposed to be rectified, and the petitioner was afforded an opportunity to be heard in that regard. According to the AO, an amount of Rs. 6,29,00,000, which was debited from the profit and loss account under the head ‘wages and salary’ was inadmissible expenditure as it did not pertain to the current period and was a prior period expense.
The petitioner assailed the notice by contending that the notice was invalid as the procedure as prescribed under Section 148A was not followed. The petitioner vacated that it was impermissible to issue a notice after 31.03.2021 under the statutory regime that was in force prior to the date.
The department sought to sustain the said notice on the basis of the provisions of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 [TOLA] and the circulars issued by the Central Board of Direct Taxes [CBDT]. Several other such notices were also subject matter of challenge in various petitions filed before this court as well as various other High Courts.
The court held that no proceedings for initiation of reassessment could have been initiated under the provisions relating to reassessment that were in force prior to 01.04.2021 after expiry of four years from the end of the relevant assessment year.
Case Details
Case Title: Ratnagiri Gas And Power Private Limited Versus Assistant Commissioner Of Income Tax
Case No.: W.P.(C) 221/2023
Date: 02.05.2025
Counsel For Petitioner: Nischay Kantoor
Counsel For Respondent: Sunil Agarwal
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