2022 (8) TMI 1095 - HC - Income Tax

Reopening of assessment u/s 147 - Period of limitation - eligible reasons to believe - whether petitioner has made a full and true disclosure ? - whether impugned reassessment is barred by limitation? - HELD THAT - In the present case and in light of the admitted position that the issues featuring in reasons for re-assessment had been taken up for assessment originally but not pursued by the officer, the assessing officer being convinced by the explanation furnished by the petitioner, the petitioner has made a full and true disclosure originally, and the impugned proceedings are barred by law. There is also no material has been found by the officer post the original assessment. Thus, the impugned proceedings are barred by limitation and are not sustainable on any account. We may refer to the conclusion of the Hon ble Supreme Court in the case of Parasuram Pottery Works Co. Ltd. 1976 (11) TMI 1 - SUPREME COURT The Bench states that assessment proceedings must have a finality at some point, for a society to be referred to as civilized. Revisiting jaded issues time and again, without allowing them to rest would be contrary to the above dictum. All the more in a case such as the present where there is not even an allegation that the assessee/petitioner has supressed income and made an incomplete and untrue disclosure. In fact, the reasons proceed wholly on the basis of the materials furnished by the petitioner originally as well as on Instructions issued by the Central Board of Direct taxes that have been cited by the petitioner and noticed by the officer. The impugned proceedings are quashed and this writ petition is allowed.

Issues Involved:
1. Bar of limitation for reassessment.
2. Full and true disclosure of material facts by the petitioner.
3. Specific queries raised and addressed during the original assessment.
4. Justification for reassessment based on new material or information.

Issue-wise Detailed Analysis:

1. Bar of Limitation for Reassessment:
The petitioner challenged the reassessment proceedings for AY 2012-13 on the grounds that they were barred by limitation. The reassessment notice was issued on 27.03.2019, just before the six-year limitation period expired. According to Section 147 of the Income Tax Act, reassessment beyond four years is permissible only if the income escaped assessment due to the assessee's failure to disclose fully and truly all material facts.

2. Full and True Disclosure of Material Facts by the Petitioner:
The petitioner argued that all material facts were fully and truly disclosed during the original assessment. The court referred to the Supreme Court's ruling in Calcutta Discount Co. Vs. Income Tax Officer, which states that the assessee is responsible only for disclosing primary facts. Any further details must be obtained by the assessing officer through enquiry and verification.

3. Specific Queries Raised and Addressed During the Original Assessment:
The court examined the sequence of events and documents to conclude that all issues raised in the reassessment notice were already addressed during the original assessment. Specific queries were raised by the officer, and the petitioner provided detailed responses and supporting documents. The court noted that there was no dispute regarding the sequence of events, dates, or documents.

3.1 Mark-to-Market Loss on Forward Contracts:
The petitioner had disclosed details of mark-to-market losses on forward contracts in response to a notice under Section 142(1). The petitioner provided a detailed explanation and supporting documents, including unit-wise break-up and copies of forward contracts. The court found that full and true disclosure was made before the original assessment order was passed.

3.2 Losses of SEZ Units:
The petitioner had provided detailed submissions on the eligibility to set off losses incurred by SEZ units against other taxable income. The court found that the petitioner had made a true and full disclosure of all material facts, including references to relevant CBDT Circulars.

3.3 Cost of Software Licenses:
The petitioner disclosed its accounting policy for capitalizing software licenses as fixed assets in its financial statements. The petitioner provided detailed responses to specific queries raised by the officer regarding software licenses. The court found that the assessment was completed after due consideration of the treatment accorded by the petitioner towards software licenses.

3.4 Deduction under Section 10AA for Gurgaon MrX SEZ Unit:
The petitioner disclosed the amalgamation of MarketRx India Private Limited and Cognizant India Private Limited with the petitioner in its financial statements and submissions. The court found that the amalgamation and the claim of deduction under Section 10AA were duly disclosed and accepted in the original assessment.

3.5 Disallowance under Section 14A:
The petitioner provided detailed submissions on the disallowance under Section 14A, including explanations regarding investments in shares and mutual funds. The court found that the issue was duly noted and addressed in the original assessment.

3.6 Provision for Customer Rebate and Billed Receivables:
The petitioner disclosed details of provisions made during the year, including customer rebates and receivables, in response to specific queries. The court found that there was complete disclosure and that the officer was attempting to reappreciate existing materials.

4. Justification for Reassessment Based on New Material or Information:
The court found that there was no new material or information that came to the knowledge of the assessing officer post the original assessment. The reassessment proceedings were based on the same materials furnished by the petitioner during the original assessment. The court cited the Supreme Court's ruling in Parasuram Pottery Works Co. Ltd. Vs. Income Tax Officer, emphasizing the need for finality in assessment proceedings.

Conclusion:
The court held that the reassessment proceedings were barred by limitation and not sustainable on any account. The petitioner had made a full and true disclosure of all material facts during the original assessment. The impugned proceedings were quashed, and the writ petition was allowed.

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