2019 (11) TMI 1309 - HC - Income Tax

Reopening of assessment u/s 147 - HELD THAT - There is no failure on the part of the Petitioner to make true and full disclosure of all material facts necessary for assessment. Thus, on this ground, it is beyond jurisdiction, as the notice is hit by the first proviso to Section 147 of the Act. Allowability of expenditure of renovation expenses - From the order under Section 143(3) of the Act, on this issue, the Petitioner has filed Appeal to the Commissioner of Income Tax (Appeals) who allowed the Petitioner s appeal. This by holding that the expenses of ₹ 77 lakhs are also be allowed as Revenue expenses. The Revenue is now in appeal before the Tribunal. Therefore, it is submitted that there is no failure on the part of the Petitioner to disclose fully and truly all material facts necessary for Assessment. Thus, the notice is without jurisdiction as being hit by the first proviso to Section 147 of the Act. Besides, it is also, prima facie, hit by the third proviso to Section 147 of the Act i.e. this very issue has been decided in appeal for the subject Assessment Year. Prima facie, we find some merit in the contention.Revenue seeks time to take instructions and file affidavit in reply, if necessary. At the request of Mr. Walve, Petition is adjourned to 13th January, 2020. In the meantime, there shall be ad-interim stay of the impugned notice dated 30th March, 2019.

Summary

Issues:
Challenge to notice issued under Section 148 of the Income Tax Act, 1961 for re-opening Assessment Year 2012-13 based on claimed expenditure and renovation expenses.

Analysis:
The petition challenges a notice issued under Article 226 of the Constitution of India, seeking to re-open the Assessment for the Assessment Year 2012-13 under Section 148 of the Income Tax Act, 1961. The notice was issued by the Assessing Officer based on two grounds. Firstly, it was claimed that the petitioner had claimed expenditure for seven outlets totaling ?87 lakhs during the regular Assessment Proceedings, although only expenses for two outlets were allowable. Secondly, it was argued that renovation expenses of ?92.66 lakhs were treated as capital expenses to the extent of ?77.17 lakhs and the balance as Revenue expenses, whereas the entire expenditure should have been considered as capital expenditure.

Regarding the first ground, the petitioner contended that the reasons for re-opening the assessment emanated from submissions made during the regular Assessment Proceedings, indicating no failure to disclose material facts. Thus, the notice was beyond jurisdiction as per the first proviso to Section 147 of the Act.

Concerning the second ground, it was argued that the issue of renovation expenses was already addressed in the order under Section 143(3) of the Act. The petitioner had appealed to the Commissioner of Income Tax (Appeals) who allowed the appeal, considering the expenses of ?77 lakhs as Revenue expenses. The Revenue's appeal was pending before the Tribunal. Hence, it was asserted that there was no failure to disclose material facts necessary for assessment, rendering the notice without jurisdiction under the first proviso to Section 147 of the Act. Additionally, it was suggested that the notice could be prima facie hit by the third proviso to Section 147 as the issue had been decided in appeal for the subject Assessment Year.

The Court found merit in the petitioner's contentions and granted an ad-interim stay of the impugned notice dated 30th March, 2019. The matter was adjourned to 13th January, 2020, allowing the Revenue time to provide further instructions and file an affidavit in reply if necessary.