HC Dismisses Revenue Appeal in Client Code Modification Case Where Assessee Paid Full Tax

The Income Tax Department challenged an ITAT order that had set aside reassessment proceedings initiated against the assessee, Atul Goel, alleging income earned through Client Code Modification (CCM) via a broker. The reopening was based on general information from the SFIO, without identifying specific transactions or even the correct broker. During the assessment, additions were made for transactions actually carried out through a different broker.

The assessee demonstrated that income from the impugned transactions had already been offered to tax under “Income from Other Sources” at the highest rate of 30%. Both the CIT(A) and the ITAT held the reassessment to be invalid.

Main Issue: Whether reassessment proceedings under Sections 147/148 are valid when based on vague information, incorrect foundational facts, and where the assessee has already disclosed and paid full tax on the alleged income.

HC Held: The Delhi High Court upheld the findings of the CIT(A) and ITAT, holding that the reassessment was initiated without application of mind and lacked tangible material. The Court noted that the reasons recorded by the AO did not even correctly identify the broker or specific transactions.

Since the assessee had already disclosed the income and paid tax at the highest rate, no income could be said to have escaped assessment. With the very foundation for reopening found to be erroneous, the reassessment proceedings were held to be without jurisdiction. The Revenue’s appeal was dismissed.

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