The Delhi High Court has strongly ruled that subjecting the Indian journalist, Radhika Roy (petitioner) who is the founder and former executive co-chairperson of NDTV, to reassessment proceedings second time for the self-same transaction and practically for the same issue is arbitrary and without jurisdiction.
They Court held that such reopening would fall foul to petitioner’s fundamental and constitutional rights guaranteed under Article 14, Article 19(1)(g) and Article 300A of the Constitution of India. Consequently, the Court quashed the reopening notices along with any consequential proceedings arising therefrom, and also imposed a token cost of Rs. 1 lakh per case upon the Department-Respondents, payable to each of the petitioners.
The High Court also clarified that initiation of the reassessment proceedings on the allegation that the taxpayer (petitioner) has failed to disclose truly and fully all necessary facts itself is bad in the eye of law, when it is the settled position that the taxpayer is required to disclose the primary fact about the transaction, but, the secondary fact or inference, which can be drawn from such fact, is not her obligation.
The Division Bench comprising Justice Dinesh Mehta and Justice Vinod Kumar observed that the core issue in both the first and second reassessment proceedings was the interest-free loan the petitioner received from RRPR Holding Private Limited, and during the first reassessment, the AO had specifically questioned the loan under Section 2(22)(e) of the Income Tax Act, examined the books of accounts of RRPR, and ultimately chose not to make any addition, which amounted to a conscious application of mind.
The Bench found it extremely surprising that the department was initiating proceedings again for the same transaction, merely suggesting a “new facet” by invoking Section 2(24)(iv) instead of Section 2(22)(e), which it described as “two sides of one coin”. The Bench, thus, opined that the “fresh information”, which was in the form of a complaint, did not reveal any new facts that were not already before the AO during the first reassessment.
The Bench observed that hurling reassessment proceedings in such a situation “hits the very root of fair adjudicatory process” and leads to “unnecessary harassment of the taxpayer” and “unpredictability/uncertainty, if not anarchy”. Furthermore, the Bench pointed out that reassessment proceedings under Section 147/148 of the Income Tax Act, cannot be initiated based on a mere change of opinion of the Assessing Officer, particularly when the primary facts of the transaction were fully disclosed and examined in a prior assessment or reassessment proceeding.
Once an assessment is reopened and an order is passed, the department cannot be permitted to reopen the assessment all over again for the very same transaction simply because a new facet of the same transaction is suggested or a different legal provision is invoked, added the Bench.
The Bench also clarified that invocation of an extended period of limitation is impermissible when the taxpayer has disclosed all primary material facts, and therefore, a subsequent reassessment notice issued beyond the normal time limit on such grounds is fundamentally without jurisdiction.
Briefly, the petitioners, Ms. Radhika Roy and Dr. Prannoy Roy, each holding 50% of RRPR Holding Private Limited, had initially filed return, which was processed and accepted. Subsequently, a reopening notice under Section 147/148 was issued, on the grounds that the petitioner had purchased shares of New Delhi Television Limited (NDTV) from RRPR at a price substantially lower than the market value.
During these proceedings, the Assessing Officer issued a further notice, asking the petitioner to show cause why an interest-free loan received from RRPR should not be treated as deemed dividend under Section 2(22)(e). After the petitioner furnished the relevant documents, a reassessment order was passed, but no addition was made in respect of the deemed dividend.
Three years later, another notice under Section 148 was issued for the same assessment year, based on fresh information from complaints and the perusal of RRPR’s assessment records. This information highlighted that RRPR had taken an interest-bearing loan of Rs. 375 crores from ICICI Bank and subsequently provided interest-free loans to the petitioners.
The department now proposed to treat the interest component that RRPR suffered on the loan advanced to the petitioner of Rs. 6.79 crores, as deemed income in the petitioner’s hands under Section 2(24)(iv). The petitioners, therefore, challenged these notices, arguing they were a change of opinion and fundamentally without jurisdiction.
Appearances:
Senior Advocate Sachit Jolly, along with Advocates Viyushti Rawat, Devansh Jain, and Sarthak Abrol, for the Petitioner/ Taxpayer
Advocates N. P. Sahni, Indruj Singh Rai, Sanjeev Menon, Rahul Singh, and Gaurav Kumar, for the Respondent/ Revenue
