2015 (9) TMI 1305 - HC - Income Tax

Reopening of assessment - additions on account of section 40(a)(ia), under section 14A and on account of extra depreciation claimed on computer peripherals - whether the interest payments were to be on the revenue account or the capital account? - Held that - As can be seen from the reasons, the assessing officer has done nothing but to re-examine the records which were already available and has arrived at a different conclusion in stating that the interest expenses ought to have been capitalised. This, by itself, to our mind does not amount to any failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. It has not been indicated as to what particulars were not disclosed by the assessee. All the relevant accounts and records were available for consideration and the assessing officer had considered the entire material and he gave a detailed assessment order running into five pages. It cannot be inferred from these facts that the petitioner had not made a full and true disclosure of the material particulars necessary for assessment. With regard to the second point we find that the assessing officer has not even indicated the extent of the alleged escapement of income. Furthermore, the assessing officer has once again stated that on perusal of the notes to the accounts of the assessee and particularly the note at serial number 9 of the auditor s report, it is seen that the assessee has booked the professional fees less than the job in progress brought forward from the last year on the ultimate completion by an amount of ₹ 3,21,21,550/-. Nothing further has been indicated apart from this fact which was there on record even in the original assessment. Therefore, once again we are of the view that the allegations of the assessing officer in the purported reasons that the assessee had failed to disclose full and true particulars of his income, is without any basis. Consequently, in view of the provisions of the first proviso of section 147 the revenue cannot be permitted to reopen the assessment as the necessary pre-condition for doing so in a case which is beyond four years from the end of the relevant assessment year has not been fulfilled. - Decided in favour of assessee.

Summary

Issues:
1. Validity of notice under section 148 of the Income Tax Act, 1961 for Assessment Year 2007-08.
2. Alleged failure to disclose fully and truly all material facts necessary for assessment.

Issue 1: Validity of notice under section 148:
The writ petition challenged a notice under section 148 of the Income Tax Act, 1961 issued for the Assessment Year 2007-08, along with an order passed by the Assessing Officer regarding objections raised by the petitioner. The assessment for the petitioner's income was completed under section 143(3) on a previous date. The notice under section 148 was issued beyond four years from the end of the relevant Assessment Year, triggering the first proviso to section 147 of the Act. This proviso restricts action under section 147 after the specified time unless there is an escapement of income due to the assessee's failure to disclose fully and truly all material facts necessary for assessment. The reasons cited for reopening the assessment focused on alleged failures by the assessee in disclosing certain income particulars, leading to the notice under section 148.

Issue 2: Alleged failure to disclose material facts:
The reasons provided for reopening the assessment highlighted two main issues. Firstly, it questioned the treatment of interest expenses by the assessee, claiming that interest capitalized against certain amounts was shown as NIL when it should have been capitalized, resulting in a wrong claim. The assessing officer contended that the assessee failed to disclose the true particulars of income on this matter during the original assessment. However, the court found that the assessing officer merely re-examined existing records without indicating any undisclosed particulars by the assessee. Secondly, the reasons mentioned discrepancies in the booking of professional fees by the assessee, alleging an escapement of income. Again, the court noted that these discrepancies were already present in the original assessment records and the assessing officer failed to demonstrate any new undisclosed particulars. Consequently, the court held that the allegations of the assessing officer regarding the failure to disclose material facts were unfounded, leading to the setting aside of the notice under section 148 and the related order.

In conclusion, the High Court ruled in favor of the petitioner, setting aside the notice under section 148 of the Income Tax Act, 1961, and the subsequent order passed by the Assessing Officer. The court emphasized the importance of fulfilling the pre-conditions for reopening assessments beyond the specified time limit and highlighted the necessity for concrete evidence of undisclosed material facts to justify such actions.