Section 148 notice was void ab initio if no prima facie satisfaction recorded
Case Name : AEP Investments (Mauritius) Ltd. Vs ACIT (ITAT Delhi)
Appeal Number : ITA No. 2164/Del/2023
Date of Judgement/Order : 07/12/2023 Related Assessment Year : 2017-18
Courts : All ITAT ITAT Delhi
Introduction: The recent case of AEP Investments (Mauritius) Ltd. vs ACIT witnessed a significant development as the Delhi ITAT quashed the reassessment order for A.Y. 2017-18. The decision highlights the importance of prima facie evidence in income escapement cases.
Detailed Analysis: The appeal filed by AEP Investments (Mauritius) Ltd. (AIML) against the order of the Assessing Officer for A.Y. 2017-18 presented several grounds challenging the validity of the reassessment. The key points of contention included:
1. Lack of jurisdiction and validity of the reassessment order.
2. Invalid directions issued by the Ld. Dispute Resolution Panel.
3. Allegations of undisclosed business income earned in India.
4. Assertion of income accrual in India without concrete evidence.
5. Imposition of interest and initiation of penalty proceedings.
The Delhi ITAT meticulously examined the reasons recorded by the Assessing Officer before issuing the notice under section 148 of the Income Tax Act. It was observed that while the assessee made significant foreign remittances, there was no prima facie evidence indicating income escapement. The mere absence of filing an income tax return does not automatically imply income evasion.
Furthermore, the ITAT emphasized the necessity for the Assessing Officer to establish a prima facie belief or satisfaction of income escapement before issuing a notice under section 148. In the absence of cogent material supporting such a belief, the reassessment proceedings were deemed invalid.
The case drew attention to judicial precedents, including the Rajesh Jhaveri Stock Brokers Pvt Ltd Vs ACIT and CIT v. Nova Promoters & Finlease (P) Ltd, reinforcing the requirement for prima facie evidence in reopening assessments.
Conclusion: The Delhi ITAT’s decision to quash the reassessment of AEP Investments (Mauritius) Ltd. vs ACIT underscores the significance of prima facie evidence in income escapement cases. Tax authorities must ensure the presence of cogent material before initiating reassessment proceedings, respecting the principles of natural justice and fairness. This ruling serves as a reminder of the judicial scrutiny applied to reassessment orders and the importance of procedural integrity in tax administration.
The copy of the order is as under: