TIPSY FINANCIAL AND MANAGEMENT SERVICES PVT. LTD. vs. INCOME TAX OFFICER , WARD 25(3) & ORS.

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W.P.(C)/471/2019HC DelhiDLHC01007635201918 January 2019Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE PRATEEK JALAN2 pages
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What did the High Court hold?

The High Court held that the question of the legality of the re-assessment notice, particularly concerning the competence of the issuing officer, is a ground that can be urged before the Commissioner of Income Tax (Appeal) (CIT(A)). While the court acknowledged the petitioner's complaint of non-service of the order disposing of objections, it found this prejudice not sufficient to warrant quashing the order entirely. The court directed the petitioner to approach the CIT(A) and urged all grounds, including the legality of the notice issued by an allegedly incompetent officer. To mitigate prejudice, the court stayed the demands in excess of 10% of the amounts sought to be raised by the re-assessment notice until the disposal of the appeal by the CIT(A). The CIT(A) was directed to consider all grounds and record specific findings. No issue was expressly left undecided.

What were the facts?

The petitioner, Tipsy Financial and Management Services Pvt. Ltd., filed a writ petition challenging a re-assessment notice and the subsequent re-assessment order. The petitioner's primary grievance was that the order disposing of its objections to the re-assessment notice was never served. It also contended that the final re-assessment order failed to address the objection regarding the legality of the re-assessment notice, specifically that it was issued by an officer (ITO Ward No. 25(3)) who was not competent, as the original assessment under Section 143(3) was framed by the AO of Ward No. 13. A significant tax demand of approximately ₹1.5 crores was raised.

What were the issues?

1. Whether the re-assessment notice issued by an allegedly incompetent officer is legally sustainable? 2. Whether the petitioner was prejudiced by not being served with the order disposing of its objections to the re-assessment notice? Assessee's Contentions: The petitioner argued that the re-assessment notice was invalid because it was issued by an officer not competent to do so, as the original assessment was framed by a different Assessing Officer. It also complained that the order disposing of its objections was not served, and the final re-assessment order did not address this objection. The petitioner highlighted the substantial tax demand of ₹1.5 crores. Revenue's Contentions: The judgment records that the revenue's counsel accepted notice. No specific arguments or contentions for the revenue are recorded in the judgment.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 143(3)

AI-generated summary — verify with the full judgment below

$~37 * IN THE HIGH COURT OF DELHI AT NEW DELHI

+ W.P.(C) 471/2019 & CM Nos.2105-06/2019

TIPSY FINANCIAL AND MANAGEMENT SERVICES PVT. LTD.

..... Petitioner

Through : Mr. Sanat Kapoor, Adv.

versus

INCOME TAX OFFICER , WARD 25(3) & ORS..Respondents

Through : Mr. Sanjay Kumar and Mr. Asheesh Jain, Advs.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE PRATEEK JALAN

O R D E R %

18.01.2019

Issue notice to the respondents.

Mr. Sanjay Kumar, Advocate accepts notice on behalf of the respondents.

The petitioner’s grievance is that the impugned re-assessment notice cannot be sustained because the order disposing of its objections (to the notice for re-assessment under Section 147/148) was never served upon it. It further complains that the final re-assessment order does not deal with the objection as to the legality of invocation of notice under Section 147. A substantive ground challenging the legality of the re-assessment notice is that the concerned Assessing Officer (A.O.) of Ward No.13, who had originally framed the assessment under Section 143(3) did not issue it but rather someone else i.e. ITO Ward No.25(3). It was also urged that the re-assessment order has proceeded to impose huge tax demand to the extent of `1.5

crores.

This Court is of the opinion that that the question of legality or otherwise with respect to the re-assessment notice, issued allegedly by an officer not competent to do so, is a ground that can be urged before the Commissioner of Income Tax (Appeal). At the same time, this Court is also of the opinion that given the petitioner’s complaint that it was not served with the order disposing of its objections, some element of prejudice has been caused to it, though not sufficient to warrant the quashing of the order altogether.

In these circumstances, it is open to the petitioner to approach the CIT (A) and urge all grounds including the question of legality of the order made by allegedly an incompetent officer. The demands to the extent they are in excess of 10% of the amounts sought to be raised pursuant to the re-assessment notice, are hereby stayed till the disposal of the appeal by the CIT(A). In other words, the petitioner shall pay only 10% of the demanded amount. This arrangement shall enure and bind the parties till the disposal of the appeal by then CIT (A), who shall consider all grounds urged by the petitioner and record specific findings in that regard.

The writ petition is disposed of in the above terms.

S. RAVINDRA BHAT, J

PRATEEK JALAN, J JANUARY 18, 2019/aj

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