2021 (2) TMI 799 - HC - Income Tax

Reopening of assessment u/s 147 - payment of tax on Provident Fund and ESI contributions - HELD THAT - The issue stands covered by a decision of this Court in the case of Industrial Securities and Intelligence India 2015 (7) TMI 1063 - MADRAS HIGH COURT Hence, the reassessment initiated on this score would not be pursued. Refund claim - Refund was granted to the assessee while processing the return under Section 143(1) which was omitted to be added back in the regular assessment. The amount is sought to be added back now. The question of re-assessment would not arise in such a situation, insofar as there is no escapement of income per se. The Assessing Authority could well have addressed this issue under Section 154 of the Act. The proposal for re-assessment on this score fails. Re-assessment of processing fee - There is no dispute on the position that the petitioner has been following a consistent method of accounting over the years and has been recognising income following a uniform system. The accounts of the petitioner would reveal the receipt of processing fee in advance and recognition of the amount quantified in that year in relation to deliveries is that have taken place within the financial year in question as income. The remaining fee is carried over to the subsequent financial year. Assessments for previous and later years following this consistent method of accounting have been accepted. The details in relation to the entirety of the processing fee received and the component recognised as income in this year are also available. In this case, admittedly, there is no change in the method of accounting followed. The methodology followed for recognition of revenue is the same, both prior and subsequent to this assessment. Thus there appears no justification for the present proposal to re-assess the income, seen in the light of the fact that for previous years, the accounts of the petitioner have been accepted by the Department. Proceedings for re-assessment have been initiated beyond a period of four years from the end of the relevant financial year - petitioner has made a disclosure of i) revenue from all income streams including processing fee ii) the portion of processing fee recognised as income for the purpose of taxation and (iii) balance is carried over to the subsequent year. It is true that there is no note in the financials or in the audited report explaining the method of accounting in detail, that is, to clarify the position that only the processing fee relating to the deliveries occasioned prior to 31.03.2012 had been recognised an income and the balance carried forward to the next year. Petitioner has been following a consistent method of revenue recognition over the years and it is not the revenue s case that the financials for the later years were more elaborate for the purposes of Explanation (1) when compared to the present year. What constitutes primary facts for the purposes of 'full and true disclosure' must be seen in the context of the assessment of a source of income over the years as the Assessing Officer has understood it. In fact, if one were to take a different view of the matter for this one intervening year, it would distort the overall assessments over the years and this cannot be the intention of Section 147. Thus applying the judgment of the Supreme Court in the case of Calcutta Discount 1960 (11) TMI 8 - SUPREME COURT , disclosure made by the petitioner in regard to the assessment of processing fee is a full and true disclosure for the purposes of Section 147/148. The proposal for re-assessment on this issue also fails. Deduction under Section 35 (2AB) - The approval for this deduction in Form 3 CM has been duly filed and, is admittedly, available on record. The only reason for which the present proceedings have been initiated is that Form 3 CM is not available on record. However, this appears to be a form to be exchanged inter se the Assessing Authority of the entity claiming deduction and the Prescribed Authority and it is thus for the Officer to have sought and obtained the same. In the light of there being no dispute on the position that Form 3 CM is admittedly available on file see no justification for the re-assessment initiated on this score.

Summary

Issues:
Challenge to order rejecting objections to re-assessing income for A.Y. 2012-13 under Income Tax Act, 1961.

Issue 1 - Income from stem cell storage:
The income from stem cell storage was offered for tax under Vivad se Vishwas Scheme, thus no need for re-assessment.

Issue 2 - Processing fee recognition:
Petitioner's consistent accounting method for recognizing processing fee income was accepted by the Department for previous and subsequent years. No justification for re-assessment as the method remained unchanged.

Issue 3 - Deduction under Section 35(2AB):
Petitioner claimed deduction with duly filed approval in Form 3 CM, available on record. Re-assessment initiated due to absence of Form 3 CM, but since it is on file, no justification for re-assessment.

Issue 4 - Refund omission in regular assessment:
Refund granted to assessee was omitted in regular assessment but sought to be added back now. No escapement of income, Assessing Authority could address under Section 154, re-assessment proposal fails.

Issue 5 - Tax on Provident Fund and ESI contributions:
Covered by a previous court decision, reassessment not pursued, as the issue was already addressed.

Analysis:
The judgment addressed various issues related to the re-assessment of income for A.Y. 2012-13. The court found no need for re-assessment concerning stem cell income and tax on Provident Fund/ESI contributions due to previous resolutions. The consistent accounting method for processing fee recognition was upheld, preventing the need for re-assessment. The deduction under Section 35(2AB) was deemed valid as the necessary Form 3 CM was on record. Omission of refund in regular assessment didn't warrant re-assessment. The judgment emphasized the importance of full and true disclosure by the assessee and highlighted the need for Assessing Authorities to consider primary facts for accurate assessments. Ultimately, the Writ Petition was allowed, with no costs incurred, and connected Miscellaneous Petitions were closed.