2019 (3) TMI 1658 - AT - Income Tax

Reopening of assessment - original assessment was done on book profits u/s 115JB - addition to the returned income but it had no impact on the actual taxability inasmuch as, even after the impugned addition, the actual assessment was on the same book profits u/s 115JB - HELD THAT - In INDIA GELATINE AND CHEMICALS LTD. 2015 (2) TMI 808 - GUJARAT HIGH COURT , PKM ADVISORY SERVICES P. LTD. 2011 (1) TMI 1105 - GUJARAT HIGH COURT and MOTTO TILES PVT LTD 2016 (6) TMI 381 - GUJARAT HIGH COURT even if the entire amount which is proposed to be added by the Assessing Officer is sustained, there would be no addition to the tax liability of the petitioner and the petitioner would still be governed by the provisions of section 115JB of the Act and assessed on the same book profit, it cannot be said that there was sufficient material before the Assessing Officer to form the belief that income chargeable to tax has escaped assessment. The impugned notice issued under section 148 of the Act, therefore, cannot be sustained

Summary

Issues:
Challenge to correctness of CIT(A)'s order in assessment under section 143(3) r.w.s. 147 for the assessment year 2007-08.

Analysis:
1. The appellant challenged the initiation of reopening assessment proceedings under section 147/148 and finalization under section 143(3)/r.w.s. 147. The appellant contended that the Assessing Officer erred in rejecting objections against reasons for reopening and failed to consider submissions regarding the source of information for reopening. The appellant also argued that evidence was not considered for additions made, including investments by various individuals and companies.

2. The Assessing Officer's decision to make additions based on the source of source not being proved was contested. Additionally, the appellant raised concerns about the assessment order disregarding the fact that tax payable on normal income was nil even after additions, as the total income for Income Tax charge was determined under section 115JB.

3. The Tribunal noted that the original assessment was based on book profits under section 115JB, and despite additions in the reassessment, the taxability remained the same. The crucial question was whether the reopening proceedings for escaped income assessment were legally valid. Citing relevant High Court judgments, the Tribunal held that the reassessment proceedings were not legally sustainable as the tax liability remained unaffected even after the proposed additions.

4. Relying on the decisions of the jurisdictional High Court, the Tribunal concluded that there was no sufficient material for the Assessing Officer to believe that income chargeable to tax had escaped assessment. Consequently, the reassessment proceedings were deemed vitiated in law, leading to the quashing of the reassessment itself. As a result, all other issues became academic and did not require specific adjudication.

5. Ultimately, the appeal was allowed, and the reassessment proceedings were quashed based on the legal principles established by the High Court. The judgment highlighted the importance of assessing the impact of proposed additions on the actual tax liability before initiating reopening proceedings, ensuring a lawful and justified assessment process.