A two-judge bench of the Delhi High Court has held that the inaccuracy or mistake in a notice issued under section 147 of the Income Tax Act would make the same legally not valid.
In the instant case, the Assessing Officer initiated re-assessment proceedings against the assessee by finding that in the financial year F.Y. 2010-11, the petitioner acquired further shareholdings from other entities.
Before the High Court, the petitioners contended that the re-assessment notice emphasizes that the petitioner company had the shares valued at Rs.7,22,00,000/- in the previous year. It was contended that the re-opening of assessment for the subsequent year, was based on entirely erroneous conclusions.
On behalf of the revenue, it was submitted that since the basis for the re-assessment notice was tangible material outside of the record received by the Revenue, this Court ought not to intervene in any manner whatsoever.
The bench comprising Justice S Ravindra Bhatt and Justice Prateek Jalan observed that the Revenue has hardly explained how and in under what circumstances, it can proceed to re-open the assessment for the subsequent year, F.Y. 2009-10 (A.Y. 2010-11).
“This Court is further of the opinion that there is no material to support the Revenue’s premise that any infusion of capital which was made on 01.04.2009, which could, if at all, be found to be the only basis to form a valid reason as stated in the notice. In the absence of such information, what emerges is that the investment of Rs. 7.22 crores in the equity capital of the petitioner were related quite logically or naturally, to the previous year i.e. AY 2009-10 (FY 2008-09),” the bench said.
“In these circumstances, the re-opening of the assessment, cannot be sustained even though the Revenue may be otherwise right in contending that it was based upon tangible information. Clearly, the inaccuracy or rather a mistake in this case, affected the validity of the notice,” the bench added.
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