2015 (12) TMI 1511 - HC - Income Tax

MAT computation - Working of tax liability on book profit u/s.115JB - receipt of dividend income - Reopening of assessment - Held that - In the computation of income presented by the petitioner along with the return of income the petitioner had shown book profit as per Section 115JB of the Act of 4, 23, 47, 912/-. This figure is significant and would appear in our later observations as well. In the profit and loss account the petitioner showed dividend income of 15, 458/- as income from other sources and showed profit before tax of 4, 23, 47, 912/-. For computation of book profit for the purpose of Section 115JB the petitioner adopted such amount of 4, 23, 47, 912/- as shown in the profit and loss account. There were no additions and deductions to be made as referred to in Section 115JB and therefore the final figure of book profit for the said provision came to the said original amount of 4, 23, 47, 912/-. Thus for all purposes whether for the computation of income for normal tax provisions or as per the book profit under Section 115JB of the Act the said amount of 15, 458/- was duly reflected and was accounted for. The Assessing Officer formed wrong belief that for the purpose of computing book profit under Section 115JB of the Act the said amount of 15, 458/- disappeared from the consideration.Under the circumstances notice of reopening being bad in law is quashed. - Decided in favour of assessee

Summary

Issues:

1. Challenge to notice reopening assessment for the assessment year 2010-11.
2. Validity of reasons recorded by the Assessing Officer for issuing the notice.
3. Objections raised against the notice for reopening.
4. Assessment of dividend income and computation of total income under Section 115JB of the Income Tax Act.

Issue 1: Challenge to Notice Reopening Assessment:

The petitioner challenged the notice dated 5.5.2014, through which the Assessing Officer reopened the assessment for the assessment year 2010-11, which was initially finalized under Section 143(3) of the Income Tax Act, 1961. The petitioner contended that the reasons recorded for reopening lacked validity, leading to the dismissal of objections raised against the notice. The petitioner then filed a petition challenging the said notice.

Issue 2: Validity of Reasons Recorded by the Assessing Officer:

The reasons recorded by the Assessing Officer for issuing the notice highlighted that the petitioner had earned dividend income of &8377; 15,458, which was added to the computation of total income as income from other sources. However, the Assessing Officer claimed that while working out book profit under Section 115JB of the Act, this dividend income was not considered, leading to the belief that income chargeable to tax had escaped assessment. The court observed that the petitioner had duly reflected the dividend income in the computation of income for both normal tax provisions and book profit under Section 115JB. The court found that the Assessing Officer's belief that the dividend income was not accounted for in the book profit calculation was incorrect, leading to the quashing of the reopening notice.

Issue 3: Objections Raised Against the Notice for Reopening:

The petitioner raised objections against the notice for reopening, which were dismissed by the Assessing Officer. The court considered the objections and found that the reasons for reopening the assessment lacked a valid basis, ultimately resulting in the quashing of the notice.

Issue 4: Assessment of Dividend Income and Computation under Section 115JB:

The Assessing Officer's contention regarding the exclusion of dividend income from the computation of book profit under Section 115JB was found to be unfounded. The court noted that the petitioner had correctly accounted for the dividend income in both the normal tax provisions and the book profit calculation under Section 115JB. As a result, the court concluded that the notice of reopening was legally flawed and subsequently quashed it, disposing of the petition accordingly.