2022 (5) TMI 689 - HC - Income Tax

Reopening of assessment u/s 147 - Appellant capitalized the Foreign Exchange Loss (Forex Loss) and claimed depreciation - HELD THAT - It could be seen from the order impugned herein that the learned Judge after analysing the legal position qua reopening the assessment, has categorically opined that the appellant has produced all the material facts and evidences, however, the assessing officer in the original assessment order dated 08.02.2013, has not considered many details and passed the said order in a cryptic manner. Having observed so, the learned Judge ought to have set aside the notice for reopening the assessment and remanded the matter to the assessing officer for fresh consideration. On the other hand, it was erroneously concluded that it is a deemed case where income chargeable to tax has escaped assessment and hence, the reassessment proceedings must go on. This court, without expressing any opinion on the merits of the case, is inclined to set aside the orders impugned herein as well as in the writ petition and are accordingly, set aside. Consequently, the matter is remanded to the assessing officer to decide the decision for reopening the assessment under Section 147 of the Act, afresh, by passing a speaking order, after considering all the documentary evidence and materials placed by the appellant without being influenced by any observations made by the learned Judge in the impugned order 2021 (9) TMI 249 - MADRAS HIGH COURT

Summary

Issues Involved:
Reopening of assessment under Section 147 of the Income Tax Act based on alleged escapement of income chargeable to tax.

Analysis:

Issue 1: Reopening of Assessment
The appellant challenged the reopening of the assessment for the assessment year, arguing that the notice issued under Section 148 was illegal as it was based on a change of opinion by the assessing officer and not on any new material on record. The appellant contended that all necessary material facts were disclosed during the original assessment, which was accepted by the assessing officer. The respondent, on the other hand, justified the reopening citing a shortfall in the assessment of income under section 115JB. The High Court analyzed the legal position and observed that while the appellant had provided all material facts, the original assessment order did not consider many details. The court concluded that the reassessment proceedings must continue, emphasizing the need for the appellant to defend their case and cooperate. However, the court held that the assessing officer should reconsider the matter and pass a speaking order after considering all documentary evidence and materials provided by the appellant.

Issue 2: Assessment Details
The court detailed the facts of the case, highlighting that the appellant, engaged in manufacturing automobile parts, suffered a loss due to economic crises and capitalized the Foreign Exchange Loss (Forex Loss). The appellant filed returns declaring income and claimed depreciation, which were accepted after scrutiny by the Transfer Pricing Officer and the assessing officer. Subsequently, the assessment was reopened after seven years, leading to the legal dispute. The court noted the sequence of events, including the objections filed by the appellant against the reopening, which were rejected by the respondent.

Conclusion:
The High Court set aside the orders impugned in the writ petition and the appeal, remanding the matter to the assessing officer for fresh consideration. The court directed the assessing officer to decide on the reopening of the assessment after reviewing all documentary evidence and materials provided by the appellant. The court emphasized the importance of a fair assessment process and the need for the assessing officer to pass a speaking order without influence from previous observations. The reassessment proceedings were to be completed within eight weeks from the date of the judgment. The writ appeal was disposed of without costs, and the connected miscellaneous petition was closed.