Reassessment Unsustainable Where Income Was Declared And Tax Paid At Highest Rate: Delhi High Court

The Delhi High Court has dismissed an appeal filed by the Income Tax Department, holding that reassessment proceedings cannot be sustained where the assessee has already offered the disputed income to tax at the highest applicable rate.

A Division Bench of Justices Dinesh Mehta and Vinod Kumar was hearing the Department's appeal against an ITAT order that had quashed the reassessment initiated against the assessee on allegations relating to Client Code Modification (CCM).

Based on information from Serious Fraud Investigation Office (SFIO) investigation, the Assessing Officer alleged that the respondent-assessee was a beneficiary of CCM and had earned income that had escaped assessment

The High Court noted that the reasons recorded by the AO did not refer to any specific transaction or even correctly identify the broker through whom the alleged transactions were carried out.

Despite requests by the assessee, the court further noted, details of the purported transactions were never supplied. It thus observed,

“initiation of reassessment proceedings was without application of mind and unsustainable inasmuch as there appears to be no tangible material or evidence and in the reasons recorded by the AO, neither name of any company is mentioned nor the name of broker is correct. If the foundational fact being ground for assumption of jurisdiction is non existent and erroneous, the proceedings cannot clear the test of reasonableness and prudence.”

The court further noted that the assessee had already offered the income arising from the transactions to tax under the head “income from other sources” and paid tax at the highest rate of 30%.

“The respondent-assessee had paid tax on the disputed transactions at the highest rate of tax and therefore, any question of undisclosed income or payment of lesser tax is out of place,” it said and dismissed the appeal.

Case Title: Pr. Commissioner Of Income Tax-7, Delhi v. Atul Goel

Citation: 2026 LLBiz HC(DEL) 49

Case Number: ITA 10/2026

For Appellant: Advocares Puneet Rai, SSC; Advocates Gibran, JSC, Ashvini Kumar, Rishabh Nangia and Gibran

For Respondent: Advocate Nischay Kantoor, Adv.

Click here to read order