2016 (7) TMI 937 - HC - Income Tax

Reopening of assessment - MAT applicability - Held that - Even as per the Assessing Officer presently there is no escapement of income chargeable to tax. If we put the reasons cited by the Assessing Officer in simple terms his case is that by making some additions and disallowances in the order of assessment the assessee has been taxed. As per the income so computed the provision for Minimum Alternative Tax would not apply. However the assessee has challenged such additions and disallowances. If these additions and disallowances are set aside the net income of the assessee would dip below the minimum prescribed for a company and therefore the assessee would be covered under the MAT regime. In the original assessment no computation of MAT was carried out. In short the apprehension of the Assessing Officer is that if the appeal by the assessee in connection with the assessment order in question is allowed there may arise the question of applying MAT formula. For various reasons reopening of assessment cannot be permitted on such ground. Firstly even as per the Assessing Officer presently there is no escapement of income chargeable to tax. Secondly and equally importantly if the assessee succeeds in appeal by virtue of which the normal tax computation comes to below the prescribed limit so as to kickin MAT provisions the same can always be applied as a consequence of the appellate order or by way of giving effect to the order in appeal. To this even learned counsel for the petitioner raised no dispute of course except for contending that whether the MAT provision applies to the petitioner at all itself would be a question which the petitioner can even at that stage raise before the authority. - Decided in favour of assessee.

Summary

Issues:
1. Challenge to notice for reopening assessment for the assessment year 2010-11.
2. Application of Minimum Alternative Tax (MAT) provisions.
3. Objections raised by the petitioner to the notice for reopening.
4. Assessment of income and potential impact of appellate decisions on MAT liability.

Analysis:

Issue 1: Challenge to Notice for Reopening Assessment
The petitioner, a National Dairy Development Board, contested a notice for reopening its assessment for the assessment year 2010-11. The Assessing Officer had issued the notice based on various additions and disallowances made during the original assessment under section 143(3) of the Income Tax Act, 1961. The petitioner objected to the reopening, which was subsequently rejected.

Issue 2: Application of Minimum Alternative Tax (MAT) Provisions
The Assessing Officer sought to reopen the assessment due to concerns regarding MAT liability if the appellate authority upheld the challenges made by the petitioner against the additions and disallowances in the original assessment. The Assessing Officer calculated the potential MAT liability at ?7,86,51,160, which could result in revenue loss if the appellate challenges were successful.

Issue 3: Objections Raised by the Petitioner
The petitioner raised objections to the reopening of assessment, arguing that there was currently no escapement of income chargeable to tax. The Assessing Officer's apprehension was based on the possibility that if the appellate challenges were successful, the MAT provisions might apply.

Issue 4: Assessment of Income and Impact of Appellate Decisions on MAT Liability
The High Court analyzed the situation and concluded that the reopening of assessment could not be permitted on the grounds presented by the Assessing Officer. The court noted that there was no current escapement of income chargeable to tax. Additionally, if the appellate challenges resulted in the normal tax computation falling below the prescribed limit for MAT, the MAT provisions could be applied as a consequence of the appellate order. The court quashed the impugned notice for reopening dated 26.03.2015, allowing the petition and disposing of the matter.

In summary, the High Court's judgment focused on the Assessing Officer's concerns regarding MAT liability in the context of potential appellate decisions impacting the petitioner's tax assessment for the year 2010-11. The court emphasized that the MAT provisions could be applied if necessary following the outcome of the appellate proceedings, and therefore, the reopening of assessment was not justified at the current stage.