2022 (3) TMI 156 - HC - Income Tax

Reopening of assessment u/s 147 - addition u/s 14A - re-opening is after the expiry of four years from the relevant assessment year - HELD THAT - As per proviso to Section 147 of the Act, as it was then in force, there is bar on re-opening of assessment after a period of four years where assessment under Section 143(3) of the Act has been completed unless the respondents are able to show that the escapement of income was due to failure on the part of the assessee to truly and fully disclose material facts required for assessment. Having considered the reasons, we do not find that there was any material fact which was not disclosed while the assessment proceedings were on. As noted earlier, this point has been discussed in the assessment order and the Assessing Officer had allowed petitioner s claim for interest expenditure except a sum of ₹ 98,753/-. Simply using the expression because of failure on the part of the assessee to fully and truly disclosed all material fact etc., would not help respondents because it is quite obvious that these expressions have been used only to overcome the restrictions in the proviso to Section 147 of the Act. WP allowed.

Summary

Issues:
1. Validity of notice issued under Section 148 of the Income Tax Act, 1961 for Assessment Year 2012-13.
2. Rejection of objections raised by petitioner against re-assessment proceedings.

Analysis:
1. The petitioner challenged a notice issued under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2012-13, along with the order rejecting objections against re-assessment proceedings. The petitioner had initially declared a total income of &8377; 5,21,560/-, which was later assessed at &8377; 6,22,430/-. The dispute arose regarding the claim of total interest expenditure of &8377; 83,73,815/-, with the Assessing Officer allowing only &8377; 98,753/- as reasonable expenses under Section 14A of the Act. The re-opening of the assessment was based on the alleged escapement of income due to a claim of &8377; 40,78,048/- made by the petitioner under Section 36(1)(iii) of the Act, which the Jurisdictional Assessing Officer deemed impermissible.

2. The Court noted that the re-opening of assessment after four years from the relevant assessment year, where the assessment under Section 143(3) had been completed, required the respondents to demonstrate that the escapement of income was due to the assessee's failure to fully disclose material facts. However, the Court found that there was no undisclosed material fact during the original assessment proceedings, as the Assessing Officer had already considered and allowed the petitioner's claim for interest expenditure, except for a specific amount. The Court emphasized that the mere expression of failure to disclose all material facts could not justify the re-opening, especially when it was apparent that such expressions were used to circumvent the restrictions in the proviso to Section 147 of the Act.

3. Ultimately, the Court allowed the petition and issued a writ of Certiorari to quash the notice dated 31st March, 2019, under Section 148 of the Act, along with the order dated 18th October, 2019, dealing with the petitioner's objections. The petition was disposed of with no order as to costs, affirming the petitioner's challenge against the re-assessment proceedings based on the lack of material facts and the impermissible re-opening of the assessment under Section 147 of the Act.