2022 (8) TMI 967 - HC - Income Tax

Reopening of assessment u/s 147 - re-assessment proceedings have been initiated beyond a period of four years - HELD THAT - The return of income filed had been taken up for scrutiny and the respondent assessing officer had, as part of the records, the tax audit report in Form 3CD containing, interalia, appendices 7 and 8. The appendixes set out the particulars of the expenditure incurred under Section 43B also referring to the rates and taxes of land tax, leave encashment, gratuity and others. Specifically, in column No.5, the petitioner makes reference to the amount transferred on demerger of the petitioner company. The sum total of the amounts which is the amount representing income that has, allegedly escaped assessment, as seen from the reasons for re-assessment. The proceedings were concluded by an order of assessment passed under scrutiny on 24.03.2016 after taking note of the submissions of the petitioner. Thus, in light of the discussion as above, we find that there has been full disclosure by the assessee in relation to the issues flagged in the reasons for re-assessment and the Department has not in this case discharged the statutory burden as set out in the proviso to Section 147. The impugned proceedings are held to be barred by limitation and the impugned orders are quashed. The Court makes it clear that there is nothing improper found in the procedure followed by the Assessing Authority in passing of the impugned order of re-assessment.

Summary

Issues:
Challenge to re-assessment proceedings under the Income Tax Act, 1961 for assessment year 2012-13.

Analysis:
The petitioner filed a return of income within the statutory time limit, but re-assessment proceedings were initiated later. The initial challenge through W.P.No.32806 of 2019 led to an interim stay of proceedings. However, the assessment order was passed before the interim stay was granted, leading to subsequent challenges through W.P.No.35505 of 2019. The court noted discrepancies in the timing of the assessment order and its communication to the petitioner.

The petitioner raised substantive grounds questioning the jurisdiction of the assessing officer, but the counter by the Assessing Authority focused only on the procedure followed in passing the assessment order. The court emphasized the need for addressing all issues raised by the petitioner before rendering a decision on the writ petitions.

Regarding the defence to the second writ petition, the respondent's counter failed to address the validity of the re-assessment proceedings, despite being a significant challenge raised by the petitioner. The court criticized the Respondents for overlooking the merits of the matter and being influenced by procedural issues.

The court analyzed the disclosure made by the petitioner in the original return of income and related documents, particularly in relation to Section 43B liability. It highlighted the statutory conditions under Section 147 of the Income Tax Act for initiating re-assessment proceedings beyond the normal limitation period.

The court scrutinized the reasons for re-assessment provided by the assessing officer, which alleged that the petitioner had not fully disclosed material facts. However, based on the evidence presented, including responses to queries and documents submitted during the assessment process, the court found that the petitioner had made a full and true disclosure, rendering the re-assessment proceedings invalid.

In conclusion, the court allowed the writ petitions, quashed the impugned orders of re-assessment, and highlighted the importance of timely communication of relevant facts to expedite legal proceedings. The court emphasized the need for assessing authorities to thoroughly address all issues raised by taxpayers before making decisions on re-assessment matters.