2021 (8) TMI 380 - HC - Income Tax

Reopening of assessment u/s 115WG - Fringe benefits escaping assessment - denial of natural justice - HELD THAT - At the first instance, assessments are being made on the basis of the information provided by the assessee and thereafter, if the AO has reason to believe that any fringe benefits chargeable to tax escaped assessment, then he could reopen the assessment. It is not as if the AO is empowered to reopen the assessment, if he has the reason to believe. Even thereafter if any other fringe benefits escaped assessment is noticed during the course of proceedings under Section 115WG, then also he is empowered to proceed for assessment / reassessment and pass appropriate assessment/reassessment order. Whether opportunity to be provided for reopening of assessment under Section 147 of Income Tax Act, has to be extended to Section 115WG also? - Ground raised is that the impugned order contains additional material of reasons, which were not made available to the petitioner/assessee while communicating the reasons for initiating proceedings under Section 147 - The reasons furnished for reopening of assessment in proceeding dated 14.07.2016 states that any specified security or sweat equity shares (Section 115WB(1)(d) (Difference between the fair market value on the vesting date and amount recovered from or paid by the employee) and contribution to an approved superannuation fund for employees (in excess of one lakh rupees in respect to each) only a sum of ₹ 106,72,53,396/- was offered to FBT against the total amount of ₹ 243,69,22,379/- claimed as Stock Compensation Expenses in the previous year relevant to Asst Year 2010- 11. The subsequent paragraph would state that as such the under computation of fringe benefits to the extent of ₹ 136,96,68,983/- (₹ 243,69,22,379 ₹ 106,72,53,396) in Asst Year 2009-10 is brought to notice. Typographical error committed by the Assessing Authority by not including the three lines, which was mentioned in the impugned order in the reasons furnished in the proceeding dated 14.07.2016, has not caused any prejudice to the interest of the petitioner/assessee and the subject was categorically dealt with by the Assessing Authority through out the proceedings and the petitioner/assessee also had the knowledge about the said facts and circumstances and raised objections. Even in cases where during the course of proceedings, if the Assessing Officer finds any other fringe benefits chargeable to tax, which had escaped assessment and which has come to his notice, shall also be assessed and appropriate orders shall be passed by the Authority. This being the scope of the reassessment proceedings contemplated u/s 115WG, the very ground raised that it is a 'change of opinion', cannot be accepted. The reasons were disclosed to the petitioner/assessee. The petitioner/assessee has responded to the reasons and the incompleteness of the reasons as stated by the petitioner/assessee is incorrect and certain typographical error would not constitute a ground for quashing the entire initiation of proceedings under Section 115WG. The reason for reopening as contemplated would not be construed as a 'change of opinion' and further the petitioner/assessee has to submit all the details for the purpose of completing the reassessment proceedings. Successive Assessing authority had taken a different stand is not accepted. The successive officer followed the proceedings only based on the reopening of the assessment initiated by the erstwhile officer by invoking Section 115WG and such continuation of the proceedings cannot be raised as a valid ground unless any malafide is established against any such officer. Aud it objections cannot be a reason for reopening of assessment - This Court is of an opinion that Section 147, the conditions stipulated for reopening of assessment as well as the scope of Section 133A, unambiguously portray the powers of the authority to secure informations by conducting survey. Thus, such informations provided by way of audit objections, would be a cause for re-opening of assessment under Sections 147/148 of the Act, if the Assessing Authority is able to trace out certain materials, which were not adjudicated during the original assessment. The purpose of audit objection is to ensure the correctness of the procedures followed and the decisions taken in accordance with the provisions of the Income Tax Act. Thus, during the course of audit objections, if any materials are identified, undoubtedly, such materials shall be considered as a new material for the purpose of reopening of assessment. Each provision under Chapter XIV procedure cannot be separated as far as the Income Tax Act is concerned. Each Section has got linkage with one another as far as the procedures to be followed by the authorities competent are concerned as well as the rights of an assessee to defend their case. Thus, a balancing procedures as contemplated, are to be followed scrupulously by the competent authorities. Sources through which the materials are taken cannot be questioned by the assessee. Section 147/148 provides much wider scope for the purpose of reopening of the assessment. Thus, in the presence of any new materials made available then the Assessing Officer, is duty bound to exercise his power of reopening of assessment by following procedures contemplated. Thus, the very contention raised in this regard, does not merit consideration. This being the scope of the reopening proceedings under Section 115WG, the petitioner/assessee has to participate in the reopening proceedings by availing the opportunities to be provided for the purpose of completion of proceedings. The disputed facts raised by the petitioner/assessee need not be adjudicated by the writ Court under Article 226 of the Constitution of India. Such an adjudication has to be undertaken through original records and evidences made available.

Summary

Issues Involved:
1. Legal validity of the notice issued under Section 115WH of the Income Tax Act, 1961.
2. Whether the reopening of assessment constitutes a 'change of opinion'.
3. Adequacy of reasons furnished for reopening the assessment.
4. Impact of typographical errors in the reasons furnished.
5. Whether audit objections can be a ground for reopening of assessment.

Issue-wise Detailed Analysis:

1. Legal Validity of the Notice Issued Under Section 115WH of the Income Tax Act, 1961:
The petitioner/assessee challenged the notice issued under Section 115WH dated 28.03.2016 and the consequential order dated 20.11.2017. The court examined the scope of Section 115WG, which parallels Section 147 concerning income escaping assessment. It was established that if the Assessing Officer has reason to believe that fringe benefits chargeable to tax have escaped assessment, he may assess or reassess such fringe benefits, subject to the provisions of Sections 115WH, 150, and 153. The court concluded that the notice issued was within the legal framework, and the Assessing Officer had sufficient reason to believe that fringe benefits had escaped assessment.

2. Whether the Reopening of Assessment Constitutes a 'Change of Opinion':
The petitioner argued that the reopening of the assessment was a mere 'change of opinion' since all relevant details had been furnished during the original assessment. The court noted that the purpose of reopening under Section 115WG is to reassess fringe benefits that have escaped assessment. The court emphasized that the scope of reassessment is broad and not limited to the original information provided by the assessee. Therefore, the contention that the reopening was a 'change of opinion' was not accepted.

3. Adequacy of Reasons Furnished for Reopening the Assessment:
The petitioner contended that the reasons for reopening were not fully furnished and contained discrepancies. The court examined the reasons provided in the proceedings dated 14.07.2016 and found that the reasons were adequately communicated, and the petitioner had the opportunity to respond. The court held that the reasons furnished were sufficient to justify the reopening of the assessment.

4. Impact of Typographical Errors in the Reasons Furnished:
The petitioner argued that typographical errors in the reasons furnished for reopening caused prejudice. The court acknowledged the typographical error but concluded that it did not cause any prejudice to the petitioner. The court found that the petitioner was aware of the relevant figures and details, and the typographical error did not impact the substance of the reasons for reopening. Therefore, the typographical error was not a valid ground to quash the proceedings.

5. Whether Audit Objections Can Be a Ground for Reopening of Assessment:
The petitioner contended that audit objections should not be a ground for reopening the assessment. The court referred to the provisions under Sections 147 and 133A, which allow the Assessing Officer to secure information through surveys and audits. The court held that audit objections could be considered new material for reopening the assessment if they reveal discrepancies or unadjudicated matters. Thus, the court concluded that audit objections could form a valid ground for reopening the assessment.

Conclusion:
The court dismissed the writ petition, holding that the petitioner/assessee had not established any acceptable ground for relief. The court affirmed the legal validity of the notice issued under Section 115WH and the subsequent proceedings. The court also clarified that the reopening of assessment did not constitute a 'change of opinion,' the reasons furnished were adequate, the typographical error did not cause prejudice, and audit objections could be a valid ground for reopening the assessment. Consequently, the connected Writ Miscellaneous Petition was also closed.