Reopening based on Directors complain with CLB of illegal fund siphoning justified

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HIGH COURT OF DELHI

Date of Decision: 10th January, 2013

W.P.(C) 7023/2010, W.P.(C) 8825/2011, W.P.(C) 7206/2012

Rambagh Palace Hotels Private Limited

Versus

Deputy Commissioner of Income Tax

W.P.(C) 7513/2010

Maharaj Jai SinghVersus Income Tax Officer

W.P.(C) 7516/2010

Maharaj Prithviraj SinghVersus Income Tax Officer

 

Whether a complaint filed by one of the directors before the Common Law Board alleging irregularities such as illegal siphoning off of the company’s funds by two other directors constitutes tangible material, on the basis of which reopening U/s 147 is possible?

If the complaint can constitute tangible material for reopening the assessments of the hotel, it can equally constitute tangible material giving rise to the belief that the amounts allegedly siphoned off by the present petitioners from the hotel had escaped assessment in their hands. It must be remembered that we are not at this stage concerned with the merits of the matter. We are at this stage concerned only with the question whether a prima facie belief regarding escapement of income can be entertained by the respondent on the basis of the complaint filed by the Company Law Board by Raj Kumar Devraj, one of the directors of the hotel. Our answer is in the affirmative. Accordingly, we uphold jurisdiction of the respondent to reopen the assessments of the petitioners.