2016 (1) TMI 787 - HC - Income Tax

Reopening of assessment - return was filed before the wrong authority - Held that - To the assertion of the petitioner that the return was filed before the same authority where it was previously done and that the norms required the Director of the company to file the return before the same authority where company has to be assessed, there is no serious grounds raised by the respondent. Further, the return filed by the petitioner was acknowledged and intimation under sub-section (1) of Section 143 was issued. Such being the facts, it cannot be stated that the petitioner had filed no return. The very foundation for issuing notice, therefore, as recorded in the reasons, would be belied. Other than recording that no return was filed such reasons recorded that as per the Form 26AS, it was noticed that the petitioner has received salary income of ₹ 36 lacs and had also purchased immovable properties worth ₹ 70 lacs. When the ground of non filing of the return disappears and as can be seen from the return, there was fully disclosure about the salary income of the petitioner, the reasons recorded by the Assessing Officer become completely invalid. Her attempt now to rope in the question of deemed dividend cannot be permitted since the validity must be judged on the basis of reasons recorded and not on the basis of extraneous material. Reopening quashed - Decided in favour of assessee.

Summary

Issues:
Challenge to notice for reopening of assessment previously accepted under Section 143(1) of the Income Tax Act, 1961.

Analysis:
1. The petitioner challenged the notice for reopening of assessment, which was initially accepted under Section 143(1) of the Income Tax Act. The Assessing Officer issued the impugned notice dated 31.03.2015, citing reasons related to the non-filing of the return of income for the relevant assessment year. The petitioner, a Director of a company, had disclosed his salary income in the return filed for the assessment year 2008-09, and an intimation under Section 143(1) was also issued by the department. However, the Assessing Officer sought to reopen the assessment based on the belief that the salary income had escaped assessment due to the non-filing of the return.

2. The petitioner contended that the return had indeed been filed, and the salary income was duly reflected in it. The objections raised by the petitioner against the reasons for reopening were rejected by the Assessing Officer, leading to the filing of the petition. The petitioner argued that the return was filed with the same authority as in previous years, following the norms applicable for filing tax returns manually. The department's assertion that the return was filed before the wrong authority was countered by the petitioner, emphasizing that the return filing was in compliance with prevailing norms.

3. The department's argument in support of the validity of the notice for reopening was based on the contention that the correct Assessing Officer did not have the opportunity to consider the return when it was filed before a different authority. However, the court found that the return was acknowledged, and an intimation under Section 143(1) was issued, indicating that the return was indeed filed. The court held that the reasons recorded by the Assessing Officer for reopening the assessment lacked validity once it was established that the return was filed and the salary income was disclosed.

4. The court emphasized that the validity of the notice for reopening must be judged based on the reasons recorded and not on extraneous material. Since the ground of non-filing of the return disappeared and there was full disclosure of salary income in the filed return, the reasons provided by the Assessing Officer were deemed invalid. Consequently, the court quashed the impugned notice, allowing the petition and disposing of the matter accordingly.