COMMISSIONER OF INCOME TAX -V vs. M/S DLF BUILDING & SERVICES (P) LTD. [FORMERLY KNOWN AS NACHIKETA REAL ESTATES (P) LTD.]

PDF · subscribers
WTA/5/2016HC DelhiDLHC01652298201529 April 2016Bench: HON'BLE DR. JUSTICE S.MURALIDHAR,HON'BLE MR. JUSTICE VIBHU BAKHRU3 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the reassessment under Section 24 of the Act was unwarranted and invalid. The Court reasoned that a valid "reason to believe" under Section 24 of the Act is akin to a notice under Section 147/148 of the Income Tax Act, which necessitates the indication of some new materials apart from existing documents to justify the assessment. In this case, these essential ingredients were absent. The STO had invoked powers under Section 24 against a concluded assessment, and while the original notice was not produced, the existing materials, including the Tribunal's order, indicated that the STO's opinion was based on the assessee paying a lower rate of tax on cooking hoods using ducting technology, without any new material. Therefore, the impugned order of the Tribunal, which presumably upheld the reassessment, was set aside. The appeal was allowed.

What were the facts?

The assessee, M/s Franke Faber India Pvt. Ltd., is challenging an order of the Commissioner, Trade & Taxes, Delhi. The assessment year in question is 2003-04. The dispute arises from the Sales Tax Officer (STO) invoking powers under Section 24 of the Act for reassessment. The STO's action was based on an opinion that the assessee was paying a lower rate of tax (8%) on cooking hoods using ducting technology, whereas a previous order of the Sales Tax Appellate Tribunal had differentiated between products using ducting technology (attracting 8% duty) and those recirculating air (attracting 12% duty). The STO's original notice under Section 24 is not on record, having been weeded out.

What were the issues?

1. Whether reassessment under Section 24 of the Income Tax Act, 1961, for the period 2003-04 is valid in the circumstances of the case? (Question of law) Assessee's Contention: The assessee implicitly argues that the reassessment is invalid. The judgment notes that the STO invoked powers under Section 24 against a concluded assessment, relying on the previous Tribunal's decision but acting independently. The absence of new materials, as required for a valid reason to believe under Section 24, is a key point. Revenue's Contention: The revenue, through learned standing counsel, submitted that the notice under Section 24 is not available as it has been weeded out. However, the judgment indicates that the Tribunal's order itself bears out the STO's opinion regarding the lower tax rate paid by the appellant.

Which sections of the Income-tax Act were involved?

Section 24,Section 147,Section 148

AI-generated summary — verify with the full judgment below

$~16 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ST.APPL. 5/2016 M/S FRANKE FABER INDIA PVT. LTD. ..... Petitioner Through: Mr. Ruchir Bhatia, Adv. versus COMMISSIONER, TRADE & TAXES, DELHI ..... Respondent Through: Mr. Gautam Narayan, ASC with Mr. R.A. Iyer, Adv. and Mr. V.P. Singh, AVATO. CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE NAJMI WAZIRI O R D E R % 28.11.2016 Admit. The question of law urged is: “whether in the circumstances of the case re- assessment under Section 24 of the Income Tax Act, 1961 (in short the Act) for the period in question i.e. 2003-04 is valid?” The assessee had sought and obtained opinion under Section 49 of the Act which led to an appeal before the Sales Tax Appellate Tribunal (in short the Tribunal). The Tribunal ruled that the two types of products i.e. cooking hoods which entailed use of ducting technology on the one hand and the others which re-circulate air had

to be treated differently for the purposes of sales tax; whereas the former attracted 8% duty the latter attracted 12% duty. The remit after the Tribunal’s order by the First Appellate Authority was enlarged by the STO who invoked his powers under Section 24 of the Act. In an appeal decided today (i.e. ST. APPL. 4/2016) the Court held that the utilisation of power under Section 24 of the Act in the circumstances of the case was unwarranted. In the present case as well, as against a concluded assessment which appears to have been premised upon the previous years’ decision of the Tribunal, the STO invoked his powers again under Section 24 – though independently. Although the original notice of the STO under Section 24 of the Act has not been produced, the learned standing counsel submits that the notice is not available and has been since weeded out the materials on the record in the form of the order of the Tribunal amply bear out that the STO merely formed an opinion that the appellant was paying a lower rate of tax i.e. 8% on the cooking hoods which used the ducting technology. It has been held in Hoshyar Singh Suresh Chandra Sarees Pvt. Ltd. vs Commissioner, Sales Tax, New Delhi & Anr. (2004) 136 STC 173 that a valid “reason to believe” under Section 24 of the Act is akin to a notice under Section 147/148 of the Act which has to indicate some new materials apart from the existing documents on the record to justify the assessment. In the present case, those ingredients are absent.

Consequently, the impugned order of the Tribunal has to be and is, therefore, set aside. The appeal is allowed. S. RAVINDRA BHAT, J NAJMI WAZIRI, J NOVEMBER 28, 2016/kk

More judgments on Section 24

All 701 judgments and leading authorities on Section 24 →

Recent GST High Court judgments

Search GST case law →