2022 (4) TMI 594 - HC - Income Tax

Reopening of assessment u/s 147 - reopening as based on audit objection - notice beyond four years - deduction claimed under section 35AC and 80G - valid sanction obtained under section 151 or not?- - HELD THAT - The statement in the reasons for reopening it is evident from the above facts that the assessee had not truly and fully disclosed material facts necessary for his assessment for the year under consideration thereby necessitating reopening under section 147 of the Act is clearly made only as an attempt to take the case out of restrictions imposed by the proviso to section 147 of the Act. Reopening of the assessment is also at the behest of audit party and therefore, reopening is misconceived, incorrect and bad in law. Sanction obtained under section 151 - Sub-Section 1 of Section 151 of the Act provides that no notice shall be issued under Section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a ft case for the issue of such notice. Admittedly in this case, four years from the end of the relevant assessment year A.Y. 2015-16 has expired before the issuance of notice and the approval also has been obtained from the Additional Commissioner of Income Tax and not Principal Commissioner of Income Tax. In the affidavit-in-reply fled through Yashraj Nain, affirmed on 25.03.2022, these facts have not been disputed but according to respondents, the approval granted by the Additional Commissioner of Income Tax was a valid approval. Even for a moment, we agree with the view expressed by respondents, still it applies to only cases where the limitation was expiring on 31st March 2020. In the case at hand, the assessment year is 2015-16 and, therefore, the six years limitation will expire only on 31st March 2022. Certainly, therefore, the Relaxation Act provisions will not be applicable. In any event, the time to issue notice may have been extended but that would not amount to amending the provisions of Section 151 of the Act. In our view, since four years had expired from the end of the relevant assessment year, as provided under Section 151(1) of the Act, it is only the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner who could have accorded the approval and not the Additional Commissioner of Income Tax. On this ground alone, we will have to set aside the notice dated 31.03.2021 issued under Section 148 of the Act, which is impugned in this petition - Appeal of assessee allowed.

Issues Involved:
1. Deduction of Corporate Social Responsibility (CSR) expenses under sections 35AC and 80G of the Income Tax Act, 1961.
2. Validity of reopening the assessment under section 147 of the Income Tax Act, 1961.
3. Validity of sanction obtained under section 151 of the Income Tax Act, 1961.
4. Reopening of assessment based on audit objections.

Detailed Analysis:

1. Deduction of CSR Expenses:
The petitioner, a company engaged in air conditioning and refrigeration, incurred ?3,30,82,713 towards CSR activities for the Assessment Year (A.Y.) 2015-16. The petitioner disclosed this in "Note 25" of the Annual Accounts. In its return of income, the petitioner claimed deductions under sections 35AC and 80G of the Income Tax Act, 1961, for donations made to various institutions. The petitioner argued that since the donations were part of CSR expenses already debited to the profit and loss account, the donations in other expenses were shown as Nil in "Note 25". The deductions were also reflected in the Tax Audit Report.

2. Validity of Reopening the Assessment:
The petitioner received a notice dated 31.03.2021 under section 148 of the Act, asserting that income chargeable to tax for A.Y. 2015-16 had escaped assessment. The reopening was based on a change of opinion, relying on materials already considered by the Assessing Officer during the assessment proceedings. The court held that reopening based on the same primary facts and a change of opinion is not permissible. The court cited the Calcutta High Court's judgment in Income Tax Officer vs. Calcutta Chromotype (P) Ltd., stating that there was nothing more to disclose, and the petitioner had fully disclosed all material facts.

3. Validity of Sanction Obtained:
The petitioner argued that the sanction obtained under section 151 of the Act was invalid since it was granted by an Additional Commissioner of Income Tax, whereas the law requires sanction from a Principal Chief Commissioner, Chief Commissioner, Principal Commissioner, or Commissioner if the reopening is more than four years after the relevant assessment year. The court agreed with the petitioner, stating that the sanction was not valid and, therefore, the notice issued based on this invalid sanction had to be quashed.

4. Reopening Based on Audit Objections:
The petitioner contended that the reopening was based on audit objections. The court referred to previous judgments, including Hamilton Housewares (P) Ltd. vs. Deputy Commissioner of Income Tax and Commissioner of Income Tax vs. Rajan N. Aswani, which established that the decision to reopen must be based on the Assessing Officer's independent belief. The court found that the reopening in this case was at the behest of the audit party and not an independent decision by the Assessing Officer, making the reopening misconceived, incorrect, and bad in law.

Conclusion:
The court allowed the petition, quashing the notice dated 31.03.2021 issued under section 148 of the Act and the impugned order dated 21.01.2022. The petition was disposed of, and the court issued a writ of Certiorari to set aside the impugned notice and order.

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