2015 (8) TMI 570 - HC - Income Tax

Reopening of assessment - Valuation of closing stock - Adjustment under section 145A - inclusion of duty of excise / cenvat credit - Held that - A.O. made addition on account of adjustment under section 145A of the I.T. Act and the same came to be deleted by the learned CIT(A), thereafter it is not open for the A.O. to reopen the assessment on the same ground. Considering the aforesaid facts and circumstances of the case, it cannot be said that the assessee did not disclose fully and truly all material facts necessary for the assessment and therefore, the income chargeable to tax has escaped due to the failure on the part of the assessee to disclose fully and truly all material facts. Under the circumstances, the condition precedent for invoking powers under section 147 of the Income Tax Act to initiate reassessment proceedings beyond the period of 4 years are not at all satisfied Applying the decision of the Division Bench of this Court in the case of Niko Resources Ltd. (2014 (9) TMI 892 - GUJARAT HIGH COURT) as well as Gujarat Lease Financing Limited (2013 (10) TMI 101 - GUJARAT HIGH COURT), to the facts of the case on hand and as observed hereinabove, there does not appear to be any failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment, the initiation of the impugned reassessment proceedings which are initiated beyond the period of four years, are not permissible and the same cannot be sustained and on that ground alone, the impugned reassessment proceedings deserve to be quashed and set aside. 6.00. In view of the above and for the reasons stated above, present petition succeeds. The impugned notice under section 148 of the Income Tax Act for A.Y. 2008-2009 is hereby quashed and set aside and the impugned reassessment proceedings of reopening assessment for the A.Y. 2008-2009 are hereby terminated on the aforesaid ground alone.- Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening assessment under Section 148 of the Income Tax Act.
2. Alleged failure of the assessee to disclose fully and truly all material facts.
3. Applicability of Section 145A adjustments.
4. Jurisdiction of the Assessing Officer to initiate reassessment beyond four years.

Detailed Analysis:

1. Validity of Reopening Assessment under Section 148 of the Income Tax Act:
The petitioner challenged the notice dated 15/11/2013 issued under Section 148 for the Assessment Year (A.Y.) 2008-2009, arguing that the reassessment proceedings were initiated after four years without any failure on their part to disclose fully and truly all material facts. The court noted that reassessment beyond four years is permissible only if the income has escaped assessment due to the assessee's failure to disclose material facts necessary for the assessment.

2. Alleged Failure of the Assessee to Disclose Fully and Truly All Material Facts:
The petitioner argued that all details were duly provided during the original assessment, and the Assessing Officer (A.O.) had scrutinized the same. The court observed that during the original assessment, the A.O. specifically dealt with the adjustment under Section 145A and made an addition of Rs. 28,94,837/-, which was later deleted by the Commissioner of Income Tax (Appeals) [CIT(A)]. Therefore, it was held that there was no failure on the part of the assessee to disclose all material facts.

3. Applicability of Section 145A Adjustments:
The respondent contended that the assessee followed an exclusive method of accounting for CENVAT, contrary to the inclusive method mandated under Section 145A, resulting in underassessment of Rs. 97,83,767/-. The court noted that the A.O. had already made an addition under Section 145A during the original assessment, which was challenged and deleted by the CIT(A). Thus, reopening the assessment on the same grounds was not permissible.

4. Jurisdiction of the Assessing Officer to Initiate Reassessment Beyond Four Years:
The court emphasized that reassessment beyond four years is only justified if there is a failure on the part of the assessee to disclose material facts. Since the assessee had disclosed all material facts and the A.O. had already considered these during the original assessment, the court held that the conditions for invoking Section 147 beyond four years were not satisfied. The court cited precedents, including the cases of Niko Resources Ltd. and Gujarat Lease Financing Limited, to support its decision that the reassessment proceedings were without jurisdiction and bad in law.

Conclusion:
The court concluded that the initiation of reassessment proceedings beyond four years was not permissible as there was no failure on the part of the assessee to disclose all material facts. Consequently, the impugned notice under Section 148 and the reassessment proceedings for A.Y. 2008-2009 were quashed and set aside. The rule was made absolute with no order as to costs.