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2017 (12) TMI 587 - HC - Income TaxReassessment notices under Sections 147/148 - scheme of amalgamation - Held that - In the present case, there is no doubt that this court had, while accepting the scheme for amalgamation, facially accepted the method which the assessee indicated. At that stage, neither did the court conduct any detailed inquiry into the question of the appropriateness of the method, nor was it competent to return findings that would have been conclusive. This event was relied upon by the assessee to argue that the court, under the Companies Act, had accepted the method. However, that ipso facto could not have barred any inquiry by the AO. Indisputably, the AO did not proceed further, but merely accepted the assessee s arguments. In these circumstances, the materials produced for AY 2009-10 triggered the reassessment notices in the present case. Having regard to the law declared in Calcutta Discount (1960 (11) TMI 8 - SUPREME Court) and Phool Chand Bajrangi Lal (1993 (7) TMI 1 - SUPREME Court ) it is held that there is no infirmity with the impugned reassessment notices.
Issues Involved:
1. Validity of reassessment notices issued under Sections 147/148 of the Income Tax Act, 1961. 2. Alleged improper application of accounting standards leading to concealment of true income. 3. Whether the reassessment notices constitute a review of the same material, which is impermissible. 4. Compliance with disclosure obligations under Section 147 of the Income Tax Act. Detailed Analysis: 1. Validity of Reassessment Notices: The primary issue revolves around the validity of reassessment notices issued by the revenue under Sections 147/148 of the Income Tax Act, 1961. The assessee contends that these notices are vitiated and unsupportable in law, arguing that the reasons for reopening the completed assessments are impermissible as they amount to a review of the same material on record. The court, however, finds that the reassessment notices are valid, as the Assessing Officer (AO) discovered fresh material during the assessment for AY 2009-10, which indicated that the assessee had adopted a wrong method for calculating depreciation, thereby justifying the reassessment for AY 2007-08 and AY 2008-09. 2. Alleged Improper Application of Accounting Standards: The assessee argues that the reasons given for reassessment—namely, the application of a wrong accounting standard resulting in the concealment of true income—are unjustified. The assessee maintains that all material facts were duly disclosed, and the accounting was in accordance with Generally Accepted Accounting Principles (GAAP) and certified by statutory auditors. The revenue, on the other hand, argues that the assessee followed the 'purchase method' instead of the 'pooling of interest' method for accounting the amalgamation, which led to the creation of goodwill and a subsequent reduction in taxable income. The court concludes that the AO's discovery of the improper application of accounting standards justifies the reassessment. 3. Review of the Same Material: The assessee contends that the reassessment notices amount to a review of the same material already scrutinized during the original assessment, which is impermissible. The court, however, distinguishes between a mere change of opinion and the discovery of fresh material. It holds that the AO's reassessment is not merely a review but is based on new information that surfaced during the assessment for AY 2009-10, which indicated that the assessee's earlier returns were potentially misleading. 4. Compliance with Disclosure Obligations: The court examines whether the assessee complied with its disclosure obligations under Section 147 of the Income Tax Act. Citing the Supreme Court's rulings in Calcutta Discount Co. Ltd. vs. Income-tax Officer and Phool Chand Bajrang Lal vs. ITO, the court emphasizes that the duty of the assessee is to disclose fully and truly all primary facts necessary for assessment. The court finds that the assessee did not disclose the full and true facts regarding the method of accounting for the amalgamation, thereby justifying the reassessment notices. The court concludes that the reassessment notices are valid as the AO had reasons to believe that income had escaped assessment due to the assessee's failure to disclose material facts fully and truly. Conclusion: The court holds that the reassessment notices issued under Sections 147/148 of the Income Tax Act are valid and justified. The writ petitions challenging these notices lack merit and are accordingly dismissed. The court underscores that the AO's discovery of fresh material during the assessment for AY 2009-10 warranted the reassessment for the previous years, and the assessee's failure to disclose full and true facts justified the reopening of the assessments.
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