2016 (7) TMI 328 - HC - Income Tax

Reopening of assessment - reasons to believe - Petitioner is a Trust - Held that - So far as first and second submissions of the Petitioner viz change of opinion and no failure to disclose all facts are concerned, both are unsustainable. This is for the reason that no scrutiny Assessment was done of the Petitioner Trust for the subject Assessment Year. The return of income was only processed under Section 143(1) of the Act. Therefore, there was no formation of opinion on the part of the Assessing Officer for change of opinion to take place. Similarly, the condition precedent in case of notices issued beyond four years of the end of the relevant Assessment Year viz the failure to disclose truly and fully facts, would have no application as no Assessment under Section 143(3) of the Act, has been done in this case. So far as the third submission of the Petitioner viz a notice on identical grounds issued to the Society for the subject Assessment Year being withdrawn, it does not/ cannot enure for the benefit of the Petitioner Trust. Each Assessee is independent and the reasons recorded for reopening have to be independently examined in the context of the Assessee whose Assessment is sought to be reopened. The fourth submission of the Petitioner that income which is alleged to have escaped Assessment has already been disclosed in the return of the Society and tax paid on the same, therefore no income chargeable to tax, has escaped Assessment is not sustainable. This for the reason that it is the prima facie view of the Revenue that the deduction claimed under Section 80P of the Act by the Society as a Cooperative is not available to the Petitioner Trust. Thus the chargeability to tax has to be seen in the context of the Assessee whose income it is. Last submission of the Petitioner the principle of consistency applies is concerned, it is to be noted that the undisputed position is that no scrutiny Assessment was carried out in the case of the Petitioner Trust. The return was processed under Section 143(1) of the Act. In that view of the matter, there has been no occasion to consider the taxability of interest income and income from the house property on merits in the hands of the PetitionerTrust. Thus, the Rule of Consistency may not apply to the present facts. This Rule of Consistency presupposes a decision on identical facts and law in an earlier and/or Assessment Year to that under consideration. This contention would require examination. This is to be done in adjudication proceedings. Therefore, it is open to the Petitioner Trust to urge the same before the Assessing Officer in the reassessment proceedings. This is not an issue which would make the impugned notice one without jurisdiction. The view of the Assessing Officer at the time of issuing the impugned notice as found in the reasons recorded, is only a prima facie view. This view is subject to correction during the Assessment Proceedings after hearing the Petitioner Trust. Further, the Petitioner Trust is not remedy less. In case, the order of the Assessing Officer, is prejudicial to it, an appeal under the Act, is provided. Therefore, in the present facts, no interference is warranted. - Decided against assessee

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reopening Assessment Year 2008-09.

Analysis:
1. The Petitioner, a Trust, challenged a notice dated 16th March, 2015, seeking to reopen the Assessment for the Assessment Year 2008-09 under Article 226 of the Constitution of India. The notice was issued under Section 148 of the Income Tax Act, 1961, as the Assessing Officer believed that income chargeable to tax had escaped assessment.

2. The reasons for reopening the assessment included the assertion that the property income from Nariman Bhavan belonged to Jolly Maker 1 Trust, but the Coop. Society, as trustee, had not filed a valid return of income for A.Y. 2008-09, declaring rental and interest income from Nariman Bhavan Property. The Assessing Officer believed that the income of the trust had been incorrectly declared in the return of the Society, leading to an alleged escape of assessment.

3. The Petitioner Trust objected to the reopening notice, arguing that there was no failure to disclose all facts, and the income in question had already been disclosed in the return filed by the Society. The Petitioner also contended that the principle of consistency should apply, as the income from interest and rent had been taxed in the hands of the Society for other Assessment Years.

4. The Court held that since no scrutiny assessment had been done for the subject Assessment Year, there was no formation of opinion for a change of opinion to occur. The condition precedent for notices issued beyond four years, regarding failure to disclose all facts, did not apply. Each Assessee is independent, and reasons for reopening must be examined accordingly.

5. The Court rejected the argument that since the income had been disclosed in the Society's return, no tax had escaped assessment. The Revenue's prima facie view was that the deduction claimed by the Society was not available to the Petitioner Trust, making the income chargeable to tax in the context of the Trust.

6. The Rule of Consistency was deemed inapplicable as no scrutiny assessment had been conducted for the Petitioner Trust. The Court emphasized that the Assessing Officer's view at the time of issuing the notice was prima facie and subject to correction during assessment proceedings. The Petitioner had the option to appeal if aggrieved by the Assessing Officer's order.

7. Ultimately, the Court dismissed the Writ Petition, stating that no interference was warranted in the present facts, and no order as to costs was issued.