2015 (3) TMI 1028 - HC - Income Tax

Validly of reassessment proceedings - addition on account of sales made to Johnson & Johnson Exports Limited - Held that - Tribunal noted that the law is that the reasons ought to be supplied on demand by the assessee. The assessee, therefore, had no occasion to note the reasons and could not object to the same. Since the objection to the same could not be raised for want of supply of reasons, the reassessment proceedings are vitiated The Tribunal noted that the Assessing Officer held that in the earlier assessment years assessee had sold the goods to its subsidiary concern at lesser price than the cost of producing those goods and sold to other parties. This was a vital and material fact not disclosed by the assessee in the return of income for the concerned and subject assessment years. That is why the assessment was reopened. The Tribunal has recorded in that these reasons for reopening the assessment are not at all convincing. The Tribunal concluded that in the notice issued under section 148 for reopening the assessment, the Assessing Officer stated that there was omission on the part of the assessee to furnish the true and correct affairs of the company. Apart from the fact that this was not enough for reopening the assessment the Tribunal found that if the Assessing Officer had any reservation about the sale price of the goods sold to the group concerns he should have questioned the genuineness of the transactions in the earlier assessment years 1993- 1994 to 1995-1996. All information regarding the sale by the assessee was before him. Full and true facts of sale price were made available to the Assessing Officer when he passed the orders for the earlier years.The Tribunal has not merely set aside the reassessment for want of notice or for want of supply of reasons though notice was issued. The Tribunal rested its conclusion also on merits of the reasons for reopening the assessments. That the Tribunal found them to be not sufficient or adequate for reopening the assessment - No substantial question of law. - Decided against revenue.

Summary

Issues:
Appeal challenging order by Income Tax Appellate Tribunal regarding reassessment proceedings and addition on account of sales made to Johnson & Johnson Exports Limited for assessment years 1993-1994, 1994-1995, and 1995-1996.

Analysis:

1. Validity of Reassessment Proceedings:
The appeal contested the validity of the reassessment proceedings initiated by the Assessing Officer. The original returns were filed by the assessee for the relevant assessment years, and subsequently, the Assessing Officer made additions during reassessment without providing the reasons for reopening the assessments upon the assessee's request. The Commissioner of Income Tax (Appeals) partially allowed the appeal, which was then challenged before the Tribunal. The Tribunal remanded the matter to the Commissioner to ascertain if the reasons for reopening were supplied to the assessee. In the subsequent round, the Commissioner upheld his findings, leading to the initiation of the subject appeals in the Tribunal. The Tribunal emphasized that reasons for reassessment should be supplied on demand by the assessee, and failure to do so could vitiate the reassessment proceedings. Despite this, the Tribunal delved into the reasons for reopening the assessment, ultimately concluding that the grounds for reassessment were not convincing. The Tribunal highlighted that if the Assessing Officer had all necessary information regarding the transactions in earlier assessment years, there was no justification for reopening the assessment.

2. Merits of Reopening the Assessment:
The Tribunal scrutinized the merits of reopening the assessment, emphasizing that the reasons provided were insufficient and did not warrant reassessment. It was noted that the Assessing Officer's concerns about the sale price of goods to group concerns should have been addressed in the earlier assessment years if deemed necessary. The Tribunal found that the material facts regarding the sale prices were disclosed to the Assessing Officer during previous assessments, rendering the reassessment unnecessary. The Tribunal concluded that both on procedural grounds and on the merits of the reassessment, there was no valid reason for reopening the assessment.

3. Legal Findings and Dismissal of Appeals:
The High Court dismissed the Revenue appeals, stating that the Tribunal's decision was based on factual findings and did not raise any substantial question of law. The Tribunal's conclusion, resting on both procedural deficiencies and lack of merit for reassessment, was upheld. The Court decided to dismiss the appeals without delving into broader legal issues, leaving them open for consideration in future cases. No costs were awarded in this matter.

In conclusion, the High Court upheld the Tribunal's decision, emphasizing the importance of providing reasons for reassessment, and highlighting that reassessment should be based on valid grounds supported by concrete evidence to prevent unnecessary disruptions to the assessment process.