2022 (6) TMI 905 - HC - Income Tax

Reopening of assessment u/s 147 - Eligibility of reasons to believe - HELD THAT - Reasons do not give any particulars as to what was the failure on the part of the Petitioner. On the contrary, the Reasons state that it is on the perusal of the assessment record that figure of only Rs.1271375/- could be seen. It is nowhere stated that, which is sought to be contended now, the second page of Note-15 was not part of the assessment record. Furthermore, what is sequator of this position is not explained as to how the second page came to be missed. Even when this fact was pointed out by the Petitioner, while disposing of the objections, the Respondent Officer did not state that the second page of the Note was not available. As in light of this factual position, the argument of the Petitioner that the impugned notice and the order proceeds on the erroneous factual ground, without looking at the relevant page, will have to be accepted. Since the foundation of the Reasons for reopening the assessment on facts, apart from various other legal challenges that arise, does not survive, the impugned notice and consequent order will have to be quashed and set aside.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 and order disposing of objections raised by the Petitioner.

Analysis:
The Petitioner, a Private Limited Company in the real estate business, filed its income tax return for the assessment year 2013-14, which was scrutinized, and an assessment order was passed. Subsequently, a notice under Section 148 was issued for the assessment year 2014-2015, alleging an excess deduction claimed by the Petitioner. The Petitioner objected to the notice, highlighting the oversight in considering the details provided in Note 15 of the return of income. Despite objections, the Respondent rejected them, leading to the Petitioner filing a writ petition challenging the notice and order.

The reasons provided for reopening the assessment focused on the discrepancy in the amount of Other Expenses debited in the Profit and Loss account. The Respondent alleged a failure on the part of the Petitioner to disclose all material facts, justifying the reopening under Section 147 (2) (c) of the Act. The Petitioner contended that the second page of Note 15, containing details of the disputed amount, was disregarded by the Respondents, leading to an erroneous factual premise for the notice and order.

The Court observed that during the original assessment and scrutiny process, the Petitioner had provided detailed information on expenses, creditors, and purchasers, which were duly considered. The Court noted that the Reasons provided for reopening lacked specificity on the alleged failure to disclose material facts and failed to address the omission of the second page of Note 15. The Court found merit in the Petitioner's argument that the notice and order were based on an erroneous factual ground due to the oversight of relevant information, warranting the quashing of the notice and order.

In conclusion, the Court allowed the writ petition, quashing the impugned notice and order, as the foundation for reopening the assessment was found to be flawed. The Court made the Rule absolute in favor of the Petitioner, without imposing any costs.