2016 (5) TMI 285 - HC - Income Tax

Reopening of assessment - whether the interest payments were to be on the revenue account or the capital account? - Held that - The petitioner had claimed it as a revenue expense and that had been allowed in the original assessment proceedings. The extent of the claim was ₹ 25,07,124. As can be seen from paragraph 2 of 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. Valuation of the jobs in progress - With regard to the second point raised in the purported reasons, 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 to section 147 of the said Act, 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 the assessment year 2007-08.
2. Whether the petitioner failed to disclose fully and truly all material facts necessary for assessment, as required under section 147 of the said Act.

Analysis:
1. The writ petition challenged a notice issued under section 148 of the Income-tax Act for the assessment year 2007-08 and the subsequent order by the Assessing Officer. The notice was issued beyond four years from the end of the relevant assessment year, invoking the first proviso to section 147. The reasons for reopening the assessment included alleged failures by the assessee to disclose true particulars of income. The Assessing Officer had made additions in the original assessment, and the reasons for reopening focused on interest expenses and professional fees treatment. The court examined whether the conditions for reopening the assessment were met, emphasizing the requirement for full and true disclosure of material facts by the assessee.

2. The court analyzed the reasons given for reopening the assessment. In the first instance, the Assessing Officer questioned the treatment of interest payments as revenue expenses, which had been allowed in the original assessment. The court noted that all relevant records were available during the original assessment, and the Assessing Officer had considered the material before arriving at a conclusion. The court found no failure on the part of the assessee to disclose necessary facts. Regarding the second issue raised in the reasons, related to professional fees treatment, the court observed that the Assessing Officer did not specify the extent of alleged income escapement or provide additional details beyond what was already on record. The court concluded that the allegations of failure to disclose true particulars of income lacked a basis, preventing the Revenue from reopening the assessment beyond the stipulated time limit.

3. Ultimately, the court allowed the writ petition, setting aside the notice under section 148 and the subsequent order. The court held that the necessary pre-condition for reopening the assessment beyond four years from the relevant assessment year had not been fulfilled. The decision highlighted the importance of meeting the statutory requirements for reopening assessments and the significance of full and true disclosure of material facts by the assessee. No costs were awarded in the matter.