RRPR HOLDINGS PRIVATE LIMITED vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-18(1)

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W.P.(C)/1663/2016HC DelhiDLHC01057659201610 September 2024Bench: HON'BLE MR. JUSTICE SUNIL GAUR2 pages
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What did the High Court hold?

The High Court allowed the writ petition and quashed the impugned notice dated August 8, 2014. The Court held that the reassessment action could not be sustained on the short ground that the Income Tax Appellate Tribunal (ITAT), in its judgment dated August 18, 2021, had determined that Section 14A of the Income Tax Act, 1961, could not be invoked for the relevant assessment year because no exempt income had been earned. The Court referred to its own decision in Principal Commissioner of Income Tax (Central) – 3 vs. Alchemist Ltd. [2024:DHC:6439-DB], stating that the ITAT's finding, even though subsequent to the notice, would clearly bind the parties. Therefore, the basis for the reassessment was found to be flawed.

What were the facts?

The petitioner, RRPR Holdings Private Limited, filed a writ petition challenging a reassessment notice dated August 8, 2014, issued under Section 148 of the Income Tax Act, 1961. The notice pertained to interest-free loans advanced by the assessee. The original assessment order, dated December 30, 2011, had made an addition based on Section 14A of the Act. Subsequently, the Income Tax Appellate Tribunal (ITAT), in a judgment dated August 18, 2021, held that Section 14A could not be invoked for that year as no exempt income had been earned. The High Court noted that this ITAT decision, though rendered after the impugned notice, would bind the parties.

What were the issues?

1. Whether the reassessment action initiated under Section 148 of the Income Tax Act, 1961, by a notice dated August 8, 2014, is sustainable, given that the original assessment order (dated December 30, 2011) was based on Section 14A, and a subsequent ITAT decision (August 18, 2021) held that Section 14A could not be invoked due to the absence of exempt income in the relevant year. Assessee's Contention: The assessee argued that the reassessment action was unsustainable. Although not explicitly detailed, the basis of their argument would be the subsequent ITAT ruling that negated the very foundation of the original addition, thus rendering the reassessment based on that addition invalid. Revenue's Contention: The revenue contended that the reassessment notice was valid. Their argument would likely focus on the information available at the time of issuing the notice and the AO's belief that income had escaped assessment, irrespective of the subsequent ITAT decision. The revenue did not cite any specific authorities or circulars in the judgment.

Which sections of the Income-tax Act were involved?

Section 148,Section 14A

AI-generated summary — verify with the full judgment below

$~54 * IN THE HIGH COURT OF DELHI AT NEW DELHI + W.P.(C) 1663/2016

RRPR HOLDINGS PRIVATE LIMITED .....Petitioner Through: Mr. Sachit Jolly, Mr. Rishabh Malhotra, Ms. Disha Jham, Ms. Soumya Singh & Mr. Devansh Jain, Advs.

versus

DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE- 18(1)

.....Respondent Through: Mr. N.P. Sahni, Spl. Counsel along with Mr. Indruj Singh, SSC, Mr. Sanjeev Menon, Mr. Rahul Singh, JSCs and Mr. Anmol Jagga, Adv.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE RAVINDER DUDEJA

O R D E R %

10.09.2024

1.

The instant writ petition has assailed the initiation of reassessment action under Section 148 of the Income Tax Act, 1961 [‘Act’] in terms of a notice dated 08 August 2014. The solitary allegation which was made in that notice was with respect to certain interest free loans which had been advanced. 2. We note from the order of assessment dated 30 December 2011 that the entire addition made in that respect by the Assessing Officer [‘AO’] itself was based upon Section 14A. 3. However, the Income Tax Appellate Tribunal [‘Tribunal’] in terms of its final judgment rendered on 18 August 2021 had held that This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 03/07/2025 at 20:25:39

since no exempt income had been earned in that year, the provisions of Section 14A could not have been invoked. This issue has been independently examined and answered by us in Principal Commissioner of Income Tax (Central) – 3 vs. Alchemist Ltd. [2024:DHC:6439-DB]. The aforesaid decision of the Tribunal, though subsequent to the impugned notice under Section 148, would clearly bind parties. On this short ground alone, we find ourselves unable to sustain the impugned action. 4. The writ petition is accordingly allowed. The impugned notice dated 08 August 2014 is hereby quashed and set aside.

YASHWANT VARMA, J

RAVINDER DUDEJA, J SEPTEMBER 10, 2024/RW

This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 03/07/2025 at 20:25:39

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