The Delhi High Court has canceled the proceedings under Section 148 of the Income Tax Act, stating that reassessment cannot start once the nature and source of receipts have been clearly explained or proven.
The Delhi High Court canceled the proceedings under Section 148 of the Income Tax Act, stating that reassessment cannot occur if the nature and source of the income have been clearly explained. The Court dismissed the reassessment actions against various entities in the Experion Group by the Assessing Officer (AO). It highlighted that the identity and creditworthiness had already been reviewed and accepted in earlier assessments by the Income Tax Department, leaving no basis for further reassessment. A Division Bench, consisting of Justice Yashwant Varma and Justice Ravinder Dudeja, remarked that the Department had acknowledged the identity and creditworthiness of Gold Singapore and the legitimacy of the transaction during assessments for the years 2012-13, 2015-16, and 2020-2021. The investment of share capital in the petitioner company was thoroughly examined in later assessment years and accepted in completed assessments under Section 143(3) of the Act. Since the nature and source of the income were satisfactorily proven and the AO did not dispute the information provided by the assessee, there was no reason to initiate reassessment for the years 2008-09 and 2011-12.
The petitioners, Experion Hospitality Pvt. Ltd. and Experion Developers Pvt. Ltd., both part of the Experion Group, received separate reassessment notices under Section 148 of the Act for the years 2008-09 and 2011-12. These reassessment actions were based on information from the Directorate of Intelligence regarding investments made by Gold Singapore, a company based in Singapore, into the petitioner firms. The Department claimed that Gold Singapore was a channel for funds from entities in tax havens and suspected that these funds might have avoided assessment.
The petitioners contested the reassessment notices by submitting writ petitions under Articles 226 and 227 of the Constitution, questioning the reasons for reopening the assessments. The High Court observed that the reassessment actions were mainly based on the claim that Gold Singapore seemed not to be conducting any business in Singapore and was created to facilitate investments in Indian companies. However, the Court noted that the Assessing Officer had already accepted the share application money and share capital from Gold Singapore without any additional scrutiny and recognized Gold Singapore as the holding company.
As a result, the Court concluded that the reasons for starting the reassessment proceedings were no longer valid. Therefore, the notices issued under Section 148 of the Act and the related proceedings were canceled. The High Court then closed the petition.
Cause Title: Experion Hospitality Pvt Ltd. v. Income Tax Officer & Ors. (Neutral Citation: 2024:DHC:8299-DB)
Appearance:
Petitioner: Senior Advocate S. Ganesh; Advocates Vaibhav Kulkarni, Udit Naresh and Himanshu Aggarwal
Respondents: SSC Sunil Agarwal; Jr. SC Shivansh B. Pandya and Viplav Acharya; Advocate Utkarsh Tiwari
