2013 (10) TMI 1227 - HC - Income Tax

Reassessment under section 147 Notice issued u/s 148 for the re-opening of assessment - payment of managerial remuneration in excess of the prescribed limit which was not approved by the central government - disclosure in the balance sheet Held that - Assessee/petitioner had disclosed full and true material particulars and had discharge its obligations under law. Material facts were stated and it is not a case where inference had to be deduced or some application of mind was required to understand and deduce any other fact. There was nothing hidden or imbedded in the document or the accounts. It is not the case of the Assessing Officer that any material had come to its possession or knowledge post the assessment under Section 143(3) of the Income Tax Act. The factual material was already before the Assessing Officer and had been fully and truly disclosed by the petitioner. The Revenue thus had to satisfy the additional requirement as mentioned in condition No. (v) as laid down by the judgment in Usha International case 2012 (9) TMI 767 - DELHI HIGH COURT i.e. there was failure or omission on the part of the Assessee to disclose full and true material facts In the present case, there is no such failure of disclosure Decided in favor of Assessee.

Summary

Issues:
Challenging order of Assistant Commissioner of Income Tax on notice under Section 148 of the Income Tax Act, 1961 for the assessment year 2001-02.

Analysis:
The petitioner, an Indian construction company, challenged an order dated 15.03.2012 by the Assistant Commissioner of Income Tax regarding the issuance of a notice under Section 148 of the Income Tax Act, 1961, for the assessment year 2001-02. The petitioner filed its return of income on 30.10.2001, declaring Rs.5,18,40,270/-, including excess managerial remuneration paid to Directors. The petitioner sought approval for the excess remuneration, which was rejected. The assessment order under Section 143(3) was passed on 31.12.2003. Subsequently, a notice under Section 148 was issued on 18.12.2006, alleging escapement of income due to excess remuneration. The petitioner objected, citing the proceedings being time-barred and a change of opinion. The respondent rejected the objections, leading to the petition challenging the order.

The respondent's reasons for reopening the assessment were based on the excess managerial remuneration not approved by the government. The petitioner contended full disclosure of material facts during the original assessment. The High Court noted the legal requirements for reopening an assessment under Section 143(3), emphasizing the need for a prima facie opinion on under-assessment or escapement of income. The Court highlighted the importance of full and true disclosure of material facts by the assessee, as failure in this regard could warrant reassessment. In this case, the Court found that the petitioner had indeed disclosed all material facts, rendering the reassessment action unsustainable.

The Court held that the reassessment proceedings were quashed as they failed to satisfy the conditions stipulated by the first proviso to Section 147. Since the petitioner had made full and true disclosure of all material facts, the reassessment was deemed unjustified. Consequently, the impugned order dated 15.03.2012 was set aside, and the proceedings initiated pursuant to the notice dated 18.12.2006 were quashed. The Court allowed the writ petition, ruling in favor of the petitioner.