2022 (9) TMI 1382 - HC - Income Tax

Reopening of assessment u/s 147 - Eligibility of reasons to believe - Period of limitation - HELD THAT - Seeing as the assessment framed originally was under scrutiny, the Assessing Authority could proceed to re-assess the income u/s 147, only if he is in a position to, and does, establish that the alleged escapement is on account of the petitioner having failed to make a full and true disclosure at the first instance. A perusal of the reasons would indicate that there is no tangible material that has been found by the Assessing Authority, post assessment, to lead to a conclusion that the original disclosure made by the petitioner was either incomplete or untrue. In fact, the only material referred to in the reasons, is the assessment order itself in which the depreciation schedule, the rates of depreciation and the claim of the petitioner in regard to depreciation have been discussed in detail. As transpires that all materials referred to in the reasons flow from the materials on record and in such circumstances, it is more than apparently clear that there has been no compliance of the statutory precondition as set out in the proviso to Section 147, in this case. The impugned proceedings of assessment having been initiated beyond the period of four (4) years from the end of the relevant assessment year are clearly barred by limitation.

Summary

Issues:
Challenging re-assessment under the Income Tax Act, 1961 for AY 2012-13.

Analysis:
1. The petitioner filed a return of income within time for AY 2012-13, which was selected for scrutiny. One specific issue was the claim of additional depreciation under Section 32(1)(iia) for a windmill owned by the petitioner.

2. The order of assessment disallowed the additional depreciation claimed by the petitioner, citing non-compliance with the statutory condition that the asset must have been acquired and put to use before 31.03.2012. The officer detailed the invoices and dates related to the acquisition and installation of the windmill to support this disallowance.

3. The petitioner challenged the disallowance by filing a statutory appeal before the Commissioner of Income tax (Appeals), which was pending. The re-assessment proceedings were initiated beyond the four-year period from the end of the relevant assessment year, necessitating compliance with the conditions under the proviso to Section 147.

4. The reasons for re-assessment were provided to the petitioner, focusing on the disallowance of regular depreciation. However, the Assessing Authority failed to establish any new material post-assessment to show that the original disclosure made by the petitioner was incomplete or untrue, as required by the proviso to Section 147.

5. As all materials referred to in the reasons for re-assessment were based on the records from the original assessment, it was evident that the statutory precondition for re-assessment beyond the four-year period was not met. Consequently, the court set aside the impugned order, ruling that the re-assessment proceedings were time-barred and lacked legal basis.

6. The judgment by Honourable Dr. Justice Anita Sumanth allowed the Writ Petition, with no costs awarded, and closed the connected Miscellaneous Petitions.