2023 (10) TMI 566 - HC - Income Tax

Reopening of assessment - tax payable on the book profits in terms of Section 115JA of the Act would be higher than the income computed under the normal provisions of the Act - HELD THAT - ITO/Respondent no. 1, in our view, failed to appreciate that he had no jurisdiction to reopen the assessment because no income had infact escaped assessment. As stated in petitioner s letter even if it is stated that ITO/Respondent no. 1 is right in his allegations that petitioner had offered said quantum of long term capital loss, that would still have no impact because petitioner continues to be liable to pay tax on the basis of profits computation as per Section 115 JA - We do not agree with respondent no. 1 that even if, no income had escaped assessment as on the date of the issue of the notice, one had to take into account the position that may arise as a result of further additions that may or may not be made in the final assessment order. He should have realised that he had no jurisdiction to proceed on the basis that some hypothetical income may be detected as a result of further investigations that may be conducted. In the recorded reasons, as alleged that petitioner has over stated the amount by taking cost of acquisition of the 2,00,000 shares of Gammon India Limited at Rs. 242.01 instead of Rs. 248.88 per share. The fact is, respondent no. 1 has not disputed that in the return and computation of income filed by petitioner, the complete facts relating to cost of acquisition of the shares has been disclosed by petitioner. The return makes it clear that the said 2,00,000 shares were purchased in FY 1995- 1996 for Rs. 4,97,75,438/- which works out to Rs. 248.88 per share. Therefore, there is no fresh tangible material to reopen the assessment. Since petitioner has paid tax on the basis of book profits in terms of Section 115 JA of the Act and the fact that even if revenue s case as set out in the reasons is accepted, there would be no change in the income offered to tax and the tax payable on the book profits in terms of Section 115 JA of the Act would be higher than the income of computation under the normal provision of the Act. The provisions of Section 152(2) of the Act states proceedings u/s 147 will be dropped if the assessee is able to establish that he had been assessed on an amount or the sum not lower than what he would be rightly liable for even if the income alleged to have escaped assessment had been taken into account. It is rather clear that the notice is issued without jurisdiction - Reopening notice set aside - Decided in favour of assessee.

Summary

Issues involved:
The judgment challenges the notice dated 8th April 2005 seeking to reopen the assessment for A.Y.-1999-2000 under Section 148 of the Income Tax Act, 1961. The primary issue is whether the notice was issued without jurisdiction due to no income actually escaping assessment.

Details of the Judgment:

Issue 1: Jurisdiction of Notice
The petitioner argued that even if the revenue's case as set out in the reasons is accepted, there would be no change in the income offered to tax and the tax payable on the book profits under Section 115JA of the Act would be higher than the income computed under the normal provisions of the Act. The petitioner relied on Section 152(2) of the Act, stating that proceedings under Section 147 will be dropped if the assessee can establish that they have been assessed on an amount not lower than what they would be rightly liable for even if the alleged income had been taken into account. The court prima facie felt that the notice was without jurisdiction.

Issue 2: Excessive Loss Claimed
The respondent argued that the excessive loss claimed by the petitioner could be carried forward and deemed as escaped income chargeable to tax. However, the petitioner's affidavit stated that there was no change in the book profit computation, and the taxable income and tax payable remained the same. The petitioner had not claimed any benefit of set off or loss in subsequent years.

Issue 3: Lack of Tangible Material
The respondent alleged that the petitioner overstated the cost of acquisition of shares, but the petitioner had disclosed complete facts in the return and computation of income. The court noted that there was no fresh tangible material to reopen the assessment. The court emphasized that the notice was issued without jurisdiction as no income had actually escaped assessment.

Separate Judgment:
The court referred to a judgment of the Hon'ble Gujarat High Court in a similar case, where it was held that even if the proposed addition was made, there would be no difference in the taxable income of the petitioner. The court concluded that the impugned notice could not be sustained.

In conclusion, the court made the rule absolute, quashing and setting aside the impugned notice and order rejecting the petitioner's objections. The petition was disposed of.