2023 (6) TMI 1224 - HC - Income Tax

Reopening of assessment u/s 147 - notice after a period of four years - disallowance of CSR expenditure - HELD THAT - Explanation 1 will not be applicable as CSR expenditure was incurred as required by section 135 of the Companies Act, 2013 and its proposed disallowance would not constitute an offense. It appears that there was no tangible material available on record to conclude that income had escaped assessment. The Apex Court in case of M.M. Aqua Technologies Ltd. 2021 (8) TMI 520 - SUPREME COURT has held that a provision in the Act, which is for removal of doubts cannot be presumed to be retrospective even where such language is used, if it alters the law as it earlier stood; and even if it is assumed that the said amendment is retrospective, it cannot give rise to a failure on the part of the Petitioner to disclose fully and truly material facts as held by this Court in the case of Voltas Ltd. 2013 (4) TMI 116 - BOMBAY HIGH COURT AO has acted in excess of the limit of his jurisdiction to reopen the assessment in the exercise of powers under section 147 read with section 148 of the Act. Accordingly the Petitioner would be entitled to succeed.

Summary

Issues involved:
The judgment addresses the challenge to a notice under section 148 of the Income-tax Act, 1961 for reopening the assessment for the Assessment Year (AY) 2013-14 and the subsequent order rejecting objections raised by the Petitioner to the notice.

Details of the Judgment:

Issue 1: Reopening of Assessment
The Petitioner, a company engaged in electricity generation, filed its original and revised income tax returns for A.Y. 2013-14. The Respondent made disallowances in the assessment order, leading to objections by the Petitioner. Subsequently, the Respondent issued a notice under section 148 to reopen the assessment, which was protested by the Petitioner. The Respondent's decision to reopen the assessment was challenged by the Petitioner, arguing that all material facts were disclosed in the original assessment and the reopening was not based on tangible material or income escapement.

Issue 2: Objections Rejection
The Respondent passed an order rejecting the objections raised by the Petitioner and issued a show cause notice for completion of assessment. The Petitioner, seeking to halt the proceedings, filed a petition challenging the notice and order issued by the Respondent.

Issue 3: Legal Considerations
The Court examined the legality of the Respondent's actions under sections 147 and 148 of the Act. It was established that unless income has escaped assessment due to the assessee's failure to disclose all material facts, the Assessing Officer lacks jurisdiction for reassessment. The judgment referenced previous cases to emphasize the importance of fully and truly disclosing primary facts for assessment purposes.

Issue 4: Conclusion
The Court found that the reasons for reopening the assessment were based on audited accounts and did not justify the reopening beyond four years. The Court highlighted that the disallowance of CSR expenditure based on a provision inserted subsequently was not sustainable. It was concluded that the Assessing Officer exceeded the jurisdiction in reopening the assessment, leading to the quashing of the notice and order issued by the Respondent.

Final Order:
The Court quashed and set aside the impugned notice and order for A.Y. 2013-14, prohibiting the Respondents from taking further steps. The rule was made absolute in favor of the Petitioner.