2012 (7) TMI 800 - HC - Income Tax

MAT - Book profit u/s 115JB - Reopen the assessment u/s 147 - writ petition under Article 226/ 227 of the Constitution of India to quash the notice - provision for gratuity and the provision for diminution in the value of the investment and claim of settlement amount as capital receipt - Held that - Petitioner in the present case had placed all the primary and relevant facts before the AO in the original assessment proceedings but has not alleged, in the reasons recorded, what further primary, material or relevant fact was omitted or had not been disclosed by the petitioner - the reasons recorded show that the only thing remained to be disclosed by the petitioner was the inference that the three items in question were to be added back to the book profit, a duty which is not placed on the assessee. The reasons also show that it was from the same facts which were disclosed by the petitioner, the first respondent formed the view or drew the inference that the items were to be added to the book profit. Nothing more was required to be done by AO except to read the audited profit & loss account, balance sheet etc. along with the schedules and notes on accounts in order to draw the inference whether the three items in question were to be added back to the book profit or not. The tax audit report and audit report in Form No.29B along with its annexures including the settlement agreement were also before him - The alleged escapement of income cannot be attributed to any failure on the part of the petitioner to furnish full and true particulars - Writ petition allowed - in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Whether the reassessment proceedings were based on a mere change of opinion.
3. Whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment.

Issue-wise Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961:
The petitioner, a private limited company, challenged the notice dated 08.03.2010 issued under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the assessment year 2003-04. The notice was issued after a period of four years from the end of the relevant assessment year. According to the first proviso to Section 147, no action can be taken after four years unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The court found that the petitioner had disclosed all primary and relevant facts during the original assessment proceedings, and the Assessing Officer did not allege any specific omission of material facts by the petitioner. Therefore, the notice under Section 148 was deemed invalid.

2. Whether the reassessment proceedings were based on a mere change of opinion:
The petitioner contended that the reassessment proceedings were invalid as they were based on a mere change of opinion. The court referred to the reasons recorded by the Assessing Officer for reopening the assessment, which included adding back the provision for gratuity, the provision for diminution in the value of mutual funds, and the amount received as a settlement. The court observed that these issues had been examined during the original assessment proceedings, and no new information or facts had come to the Assessing Officer's possession. The court held that the reassessment proceedings were indeed based on a mere change of opinion, which is not permissible.

3. Whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment:
The court examined whether the petitioner had failed to disclose fully and truly all material facts necessary for the assessment. The petitioner had provided audited financial statements, including the profit and loss account, balance sheet, and tax audit report, which disclosed the provision for gratuity, the provision for diminution in the value of mutual funds, and the settlement amount. The court noted that the duty of the assessee is limited to the disclosure of primary facts and does not extend to advising the Assessing Officer on the inferences to be drawn from those facts. The court found that the petitioner had fulfilled its duty by disclosing all primary and relevant facts, and there was no failure on its part.

Conclusion:
The court allowed the writ petition, quashing the notice dated 08.03.2010 and the order dated 16.03.2012 rejecting the petitioner's objections. The court held that the reassessment proceedings were invalid as they were based on a mere change of opinion and there was no failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment.