SC Refuses to Revive Reopened Assessments: No Tax Escapement Under MAT, 330-Day Delay Proves Fatal

The assessee challenged three reassessment notices dated 30 and 31 March 2021 issued under Section 148 for AYs 2014-15, 2015-16 and 2016-17. These notices were triggered by a search on one Hitesh Jain, allegedly involved in accommodation entries through shell concerns, with the department linking certain transactions to the company.

Before issuing the notices, the company had already undergone scrutiny assessments under Section 143(3), paid tax under the MAT provisions, and had even succeeded partly in an appeal for AY 2016-17. The company objected that the reopening was mechanical and lacked tangible material, and that even if the alleged escaped income were added, its tax liability remained unchanged under Section 115JB.

HC’s Order: The High Court examined the recorded reasons and found that the company had paid tax only under Section 115JB, and even after including the alleged escaped income, the assessed tax would remain lower than the MAT liability already discharged. Therefore, the High Court quashed the Section 148 notices for all three years. The Revenue carried the matter to the Supreme Court with a delay of 330 days.

Issue Before Apex Court: Whether reassessment proceedings under Section 148 could be sustained when the assessee was assessed under MAT, and no real tax escapement arose; and whether the Supreme Court should condone the Revenue’s 330-day delay in challenging the High Court’s quashing of the notices.

SC’s Judgment: The Court observed that the fundamental requirement for reopening an assessment under Section 147 of the Income Tax Act, which is that the Assessing Officer must possess a “reason to believe” that income has escaped assessment, is not fulfilled. Thus, the AO lacked the jurisdiction to issue the impugned notices under Section 148.

The Supreme Court further refused to condone the “gross delay” of 330 days in filing the special leave petition. The Bench noted that the reasons furnished by the department were neither satisfactory nor sufficient in law to justify such an extraordinary delay. Since the application for condonation of delay failed, the special leave petition was therefore dismissed.

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