2021 (7) TMI 464 - HC - Income Tax

Reopening of assessment u/s 147 - HELD THAT - This Court cannot go into such disputed facts regarding the materials scrutinized and the informations or details now available with the Assessing Officer for reopening of Assessment. All such details are to be gone into while undertaking the process of reassessment and now it is in the stage of disposing of the objections and therefore, the petitioner has to cooperate for reassessment. This Court is of the considered opinion that the disputed facts and circumstances based on the documents and evidences cannot be adjudicated in a writ proceedings under Article 226 of the Constitution of India. The facts relevant and the principles laid down in a particular judgment are to be considered while adjudication and this Court cannot enter into venture of adjudication of those disputed facts - reasons are communicated and the reasons would show that the expenditures are expressly disallowed under the deeming fiction created by the penal Section of IT Act, on account of infringement of law. By adding back the same item, the eligible profits got increased by these disallowances, resulting in excess claim. It is well settled principle that the deeming fictions created under any provisions of the IT Act, cannot be imported to a beneficial provision of the Act as held in the case of DCIT vs. Rameshbhai C Prajapati 2013 (1) TMI 208 - ITAT AHMEDABAD -Therefore, the above dis allowance is required to be added back to the taxable income. The disposal of the objections in the impugned order reveals that mere production of account books or other evidence from which material evidence could with due diligence have been discovered by the AO does not necessarily amount to a disclosure within the meaning of the first proviso to Section 147 - necessary . It is to further to be stated here that It is possible with due diligence the Assessing Officer would have ascertained this fact at the time of original assessment also, but in view of the explanation (1) it does not mean that there was no default on the part of the assessee . The assessee can not try to take shelter under the exception provided by the above proviso to Sec.147 that where an assessment order u/s 143 (3) has been completed, no action after the expiry of four years from the end of the assessment year can be taken. WP dismissed.

Summary

Issues: Challenge to notice under Section 148 of the Income Tax Act and the order disposing of objections.

Analysis:
1. The petitioner, a Private Limited Company, filed its return of income for the Assessment Year 2009-10 claiming deduction under Section 10 A of the Income Tax Act. The Assessing Officer issued notices under Sections 143 (2) and 142 (1) followed by the original assessment order under Section 143 (3). However, a notice under Section 148 was issued in 2016, leading to objections by the petitioner.

2. The petitioner contended that the reopening of assessment lacked a valid reason as it relied on a Tribunal's judgment, which was already decided by the Bombay High Court. The petitioner argued that there was no basis to invoke Section 147 of the Income Tax Act based on the Tribunal's judgment, especially when the Bombay High Court had already addressed similar issues regarding disallowances.

3. The petitioner further argued that the objections raised during the original assessment were not considered in the impugned order disposing of objections. The petitioner claimed that the very basis for reopening the assessment was unsustainable and should be set aside.

4. The respondents, represented by the Senior Standing Counsel, countered the petitioner's contentions by stating that the Assessing Officer must consider applicable principles and facts during reassessment. The Court cannot adjudicate disputed facts regarding materials scrutinized for reopening the assessment, as this process is part of reassessment.

5. The Court held that disputed facts and circumstances based on documents and evidence cannot be adjudicated in a writ proceeding under Article 226 of the Constitution of India. The Court emphasized that deeming fictions created under the IT Act cannot be imported to beneficial provisions of the Act. The reasons for disallowances were communicated, and the Court ruled that such disallowances needed to be added back to the taxable income.

6. The Court dismissed the writ petition, stating that the mere production of account books or evidence does not necessarily amount to disclosure within the meaning of Section 147. The Court highlighted that the Assessing Officer could have ascertained facts during the original assessment, and the petitioner could not seek shelter under exceptions provided by the proviso to Section 147 after the completion of assessment under Section 143 (3).

7. In conclusion, the Court upheld the reasons for disallowances and emphasized that the intricacies in documents should be scrutinized by the Competent Authority during reassessment, which cannot be done by the High Court. The writ petition was dismissed without costs, and the connected miscellaneous petition was closed.