Delhi High Court Delivers Sharp Rebuke to Income Tax Department
The Delhi High Court delivered a strong verdict on Monday, quashing tax reassessment notices issued against former NDTV promoters Prannoy Roy and Radhika Roy. The court did not mince words while criticizing the Income Tax department's actions.
Court Imposes Costs, Calls Proceedings 'Harassment'
A division bench comprising Justices Dinesh Mehta and Vinod Kumar imposed costs of Rs 2 lakh on the Income Tax department. This amount must be paid directly to the Roy couple. The bench made it clear that no financial penalty could truly compensate for what they termed harassment.
The court stated firmly, "No amount of cost can be treated enough for these cases." However, they decided to impose what they called "token costs" of Rs 1 lakh for each petition filed separately by Radhika and Prannoy Roy.
Tax Department Actions Deemed 'Arbitrary and Without Jurisdiction'
The High Court found the Income Tax department's actions completely unjustified. The tax notices in question were issued in March 2016 for reassessment proceedings. This marked the second time the department had pursued the same issue involving identical transactions.
The bench pointed out that an earlier round of reassessment on this very matter had already been completed. The assessing officer had recorded satisfaction with the outcome at that time. The court questioned why the department felt compelled to reopen a settled assessment.
Court Questions Department's Repeated Actions
In their ruling, the justices posed a critical question. They asked whether new officials in positions of authority could simply reopen assessments because they believed themselves wiser than their predecessors. The court answered this question with a resounding no.
The bench recorded, "...merely because the new incumbents in the chair feel themselves to be wiser and they hold another opinion which their predecessor did not or could not take, an already settled assessment cannot be unsettled."
They emphasized that taxpayers should not face what they called "the rigmarole or harassment of assessment proceedings again and again."
Fundamental Rights Violation Cited
The High Court went further in its criticism. It held that the Income Tax department's actions violated the Roys' fundamental and constitutional rights. Specifically, the court mentioned their rights over property and their right to pursue their occupation or profession without undue interference.
The bench observed, "The facts of the present case themselves speak volumes, as to how the proceedings are arbitrary and contrary to statutory provisions besides being against the fundamental principles of adjudicatory process."
Nine-Year Legal Battle Finally Concludes
This decision brings closure to a legal battle that spanned nearly nine years. Prannoy and Radhika Roy first challenged the tax notices back in 2016. The specific notices were issued on March 30, 2016, under Section 148 of the Income Tax Act.
These notices sought to reopen income tax assessments for the assessment year 2009-2010. This represented the second attempt by the department to pursue this matter, despite the assessing officer having already decided on the issue in 2013.
Background of the Tax Dispute
The entire controversy began much earlier. The Income Tax department first issued reassessment notices to the Roys in July 2011. The department alleged that their income had escaped proper assessment.
At the heart of the matter was a transaction involving the purchase of shares of New Delhi Television Limited. The department claimed the Roys had carried out this transaction with RRPR Holding Private Limited at a consideration substantially lower than market value. Additionally, the loan involved was interest-free.
The tax authorities argued this interest-free loan should be considered deemed income. However, after the Roys provided comprehensive records of their accounts in 2013, the assessing officer expressed satisfaction and chose not to make any additions to their income.
Despite this earlier resolution, the department reopened proceedings in March 2016 based on a complaint. The reasons provided in July 2016 essentially repeated the same grounds as the 2011 proceedings.
Court Had Earlier Stayed Proceedings
The Roys challenged these March 2016 notices promptly. The Delhi High Court stayed these proceedings in November 2017. At that time, the court restrained the department from passing any final order.
The court had formed a prima facie opinion that the department's proceedings before the assessing officer lacked proper jurisdiction. Monday's final judgment now makes that interim view permanent, bringing this lengthy legal chapter to a close.
