The bench also rejected the firm's plea that the notice was sent by the IT department to the wrong entity -- Sky Light Hospitality Pvt Ltd -- instead of Sky Light Hospitality LLP
Robert Vadra
The Delhi High Court has rejected the plea of a Delhi-based hospitality firm linked to Robert Vadra challenging an income tax (IT) department notice to it for re-assessment of its profits from land deals in Haryana and Rajasthan for the years 2010-11. The IT department, in a tax evasion report tabled before the high court, had said that it had reasons to believe that over Rs 35 crore, earned by the firm in 2010-11, "had escaped from assessment".
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A bench of justices Sanjiv Khanna and Chander Shekhar, taking note of the tax evasion report, said, "After going through the reasons, we are satisfied that the 'reasons to believe' show and establish a live link and connect with the inference drawn that income had escaped assessment, which is required for issuance of notice."
The court also directed the firm, Sky Light Hospitality LLP, to join proceedings before the assessing officer on February 19. The firm, in its plea challenging the IT department's notice, had contended that the 'reasons to believe' were mere reasons to suspect and do not establish that income had escaped assessment. Disagreeing with the firm's contention, the bench said that "absolute certainty is not required at the time of issue of notice and at the same time, 'reasons to believe' must not be based on mere suspicion, gossip or rumour.
The said test and criteria, we have no hesitation in holding, is satisfied in the present case". "There is evidence and material on record to justify issue of notice," it said and added that as long as there was a "honest and reasonable opinion" formed by the assessing officer and the 'reasons to believe' are not mere 'reasons to suspect', "the courts should not interject to stop the adjudication process and scrutiny on merits".
The bench also rejected the firm's plea that the notice was sent by the IT department to the wrong entity -- Sky Light Hospitality Pvt Ltd -- instead of Sky Light Hospitality LLP, saying "there was no doubt and debate that the notice was meant for the petitioner and no one else". "Legal error and mistake was made in addressing the notice. Noticeably, the appellant (Sky Light) having received the said notice, had filed without prejudice reply/letter dated April 11, 2017. They had objected to the notice being issued in the name of the company, which had ceased to exist.
"However, the reading of the said letter indicates they had understood and were aware, that the notice was for them. It was replied and dealt with by them. The fact that notice was addressed to Sky Light Hospitality Pvt Ltd, a company which had been dissolved, was an error and technical lapse on the part of the respondent (IT Department). No prejudice was caused," the court said in its order. The bench said that "human errors and mistakes cannot and should not nullify proceedings which are otherwise valid". "In view of the aforesaid discussion, we do not find any merit in the present writ petition.
We clarify that we have not expressed any opinion on merits of the case. We also deem it proper and appropriate to record that the petitioner had raised contention on merits, which we have no doubt would be examined in depth and detail by the assessing officer. "We would expect that the assessing officer would deal with all issues independently and fairly, without being influenced by this order and challenge made by the petitioner to the notice," the court said and directed the firm to appear before the assessing officer on February 19 when the date of hearing will be fixed.
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