2016 (10) TMI 362 - HC - Income Tax

Reopening of assessment - MAT applicability - Held that - As decided in PKM Advisory Services P. Ltd. V/s. Income-Tax Officer, 2011 (1) TMI 1105 - Gujarat High Court when the tax payable as per the reasons recorded is less than the tax paid by the petitioner under the assessment framed under section 143(3) of the Act, the question of any income having escaped assessment does not arise. The order recording reasons, itself indicates that in fact no income has escaped assessment and as such there is no basis for the formation of belief that income has escaped assessment. In the circumstances, the basic precondition for reopening assessment under section 147 of the Act, namely that the Assessing Officer should have reason to believe that income has escaped assessment is not satisfied. In the circumstances, the assumption of jurisdiction by the Assessing Officer by issuing notice under section 148 of the Act is without jurisdiction and as such the impugned notice under section 148 of the Act as well as all proceedings pursuant thereto cannot be sustained In case of India Gelatine And Chemicals Ltd. V/s. Assistant Commissioner of Income-Tax (No.1) 2015 (2) TMI 808 - GUJARAT HIGH COURT noted that loss claimed by the assessee even if was disallowed, there would be no difference in the assessee s tax liability under Section 115JA of the Act. It was therefore, observed that there was no escapement of income assessable to tax on such ground, notice of reopening was quashed. - Decided in favour of assessee

Summary

Issues:
Challenge to notice for reopening assessment for Assessment Year 2007-08.

Analysis:
The petitioner, a company engaged in manufacturing Ayurvedic and Herbal drugs, challenged a notice issued by the Assessing Officer to reopen the assessment for the Assessment Year 2007-08. The original assessment was conducted under Section 115JB of the Income-Tax Act, 1961, where the Assessing Officer taxed the assessee based on book profit, resulting in a demand for tax. The notice for reopening was issued within four years from the end of the relevant assessment year. The reasons for reopening included issues such as bad debts written off, rent expenses, job work CENVAT, and incorrect deduction claimed under Section 80IC of the Act for the Dehradun unit. The assessee raised objections to the notice, which were rejected, leading to the filing of the present petition.

The Assessing Officer's reasons for reopening the assessment involved multiple issues, collectively amounting to an alleged income escape of approximately ?50 lakhs. However, the petitioner's counsel argued that even if all proposed additions were made, there would be no change in the tax liability under Section 115JB. The counsel contended that the net assessable income under normal computation would still be subject to the MAT provision. The counsel's argument was supported by the revenue, acknowledging that the additions would not affect the computation of book profit under Section 115JB.

Citing precedents, the Court referred to cases where notices for reopening were quashed due to similar circumstances. In one case, it was noted that the tax payable as per the reasons recorded was less than the tax paid by the petitioner under the original assessment, indicating no income had escaped assessment. In another case, it was observed that even if the loss claimed by the assessee was disallowed, there would be no difference in tax liability under Section 115JA. Based on these precedents and the agreement between the parties that the additions would not impact the book profit computation, the Court quashed the notice for reopening. The petition was allowed, and the matter was disposed of accordingly.