2016 (12) TMI 873 - HC - Income Tax

Reopening of assessment - AO granted exemption though assessee did not claim the exemption on long term capital gain - Held that - If, on the material on record, the Assessing Officer grants some benefit / exemption, that cannot be the ground to reopen the assessment beyond four years. A wrong grant of benefit / exemption by the Assessing Officer cannot be the sole ground to reopen the assessment beyond four years for reopening of the assessment beyond four years. What is required is that there shall be non disclosure of true and correct facts by the petitioner assessee, which were required for assessment. Under the circumstances, without further entering into the larger question whether without filing the revised return of income and /or without claiming the exemption in the return of income whether such exemption can be allowed or not, on the aforesaid ground alone i.e on the ground that the conditions precedent, which are required under the provisions of Section 147 of the Income Tax Act to reopen the assessment beyond the period of four years are not satisfied, the impugned reopening proceedings deserves to be quashed and set aside. - Decided in favour of assessee

Issues:
1. Reopening of assessment for the Assessment Year 2009-10 based on notice dated 29/03/2016 under Section 147 of the Income Tax Act.
2. Grounds for reopening the assessment: Wrong grant of exemption on long term capital gain and inconsistency of capital balance.
3. Objections raised by the petitioner against the reasons for reopening the assessment.
4. Arguments presented by the petitioner and the revenue regarding the validity of the reassessment proceedings.
5. Legal analysis of the conditions precedent for invoking Section 147 of the Income Tax Act.
6. Judgment quashing and setting aside the impugned notice to reopen the assessment for the Assessment Year 2009-10.

Analysis:
The petitioner filed a petition under Article 226 of the Constitution of India seeking to quash the notice dated 29/03/2016 issued by the Assessing Officer to reopen the assessment for the Assessment Year 2009-10 under Section 147 of the Income Tax Act. The petitioner initially did not claim exemption on long term capital gain but later submitted a revised computation of income claiming the exemption. The Assessing Officer granted the exemption, leading to the reopening of the assessment beyond four years. The petitioner contended that there was no failure to disclose material facts necessary for assessment, as all relevant details were provided during the assessment proceedings. The petitioner argued that a wrong grant of exemption by the Assessing Officer cannot be the sole ground for reopening the assessment beyond four years, emphasizing the requirement of non-disclosure of true and correct facts by the assessee for invoking Section 147 of the Income Tax Act.

The petitioner's objections against the reasons for reopening the assessment highlighted that the reassessment proceedings were initiated based on audit objections without an independent formation of opinion by the Assessing Officer regarding income escaping assessment due to non-disclosure of facts. The petitioner's counsel argued that the conditions precedent for reopening the assessment beyond four years were not met, as there was no suppression or non-disclosure of material facts by the petitioner. The Assessing Officer's justification for reopening the assessment was challenged on the grounds that the petitioner had provided all necessary details during the assessment process, and any perceived errors in granting exemptions should not warrant reassessment beyond the stipulated period.

The High Court, after considering the arguments presented by both parties, ruled in favor of the petitioner. The Court held that the conditions required under Section 147 of the Income Tax Act to reopen the assessment beyond four years were not satisfied in this case. The judgment emphasized that a mere incorrect grant of benefit or exemption by the Assessing Officer cannot be the sole basis for reopening an assessment beyond the prescribed period. Consequently, the Court quashed and set aside the notice to reopen the assessment for the Assessment Year 2009-10.

← Previous Next →