2023 (10) TMI 1242 - HC - Income Tax

Reopening of assessment u/s 147 - difference between the amount invested by the petitioner/assessee in Company and the amount shown under the heading 'loans and advances' by the company in its books - investment in the OFCDs - rejection of assessee objection - Prior to the scrutiny, the petitioner/assessee, inter alia, was called upon to furnish information as to various aspects, including the amount shown in the balance sheet for the year in issue under the heading non-current investments - HELD THAT - The notices issued to the petitioner/assessee with regard to various matters including non-current investments , in reply to which petitioner/assessee has provided a complete break-up of the investments made in Divine. This is reflected in replies dated 16.12.2014 and 10.03.2015. Therefore, while there was a typographical error in Note 8 appended to the balance sheet ending on 31.03.2012, the other material before the AO clearly showed that the petitioner/assessee had made a clean breast that the amount was invested in Divine. AO, at that stage, had an opportunity to inquire further into the matter. AO for whatever reasons chose not to embark upon that journey. What is also relevant is that insofar as Divine is concerned, an order u/s 143(3) was passed on 26.02.2015. This aspect is specifically averred in the writ petition filed by the petitioner/assessee. The counter-affidavit of the respondent/revenue does not challenge or dispute the assertion made in this behalf by the petitioner/assessee. As in the order rejecting objections there is no discussion about the explanation given by the petitioner/assessee with regard to the charge levelled against it. This was not a case in which the AO could have triggered the reassessment proceeding against the petitioner/assessee. AO has failed to demonstrate that the explanation given by the petitioner/assessee was deficient and therefore, the reassessment proceeding ought to continue qua the petitioner/assessee. Accordingly, we are inclined to set aside the impugned notice issued u/s 148 and the order whereby, the petitioner/assessee s objections were rejected. Decided in favour of assessee.

Summary

Issues involved:
The judgment concerns a writ petition challenging a notice issued under Section 148 of the Income Tax Act, 1961 and the rejection of objections to the reassessment proceeding by the Assessing Officer.

Adjudication of the writ petition:
The petitioner/assessee was subjected to scrutiny assessment for Assessment Year (AY) 2012-13, where the order was passed under Section 142(1) of the Act. Despite scrutiny on non-current investments, a notice under Section 148 was issued without providing the document evidencing approval for reassessment. The petitioner/assessee filed objections explaining the difference in amounts shown in the balance sheet. The petitioner/assessee argued that the reassessment proceeding was flawed as the issue was already examined during the original assessment.

Contentions of the parties:
The petitioner/assessee argued that the reassessment was unwarranted as the investment in OFCDs was disclosed during the original assessment. The respondent/revenue contended that the petitioner's explanation was misleading and justified the reassessment. The respondent stated that the petitioner could explain the flagged transaction during the reassessment proceeding.

Court's analysis and decision:
The court noted that the petitioner had disclosed the investment in OFCDs, and the AO had the opportunity to inquire further during the original assessment. The court found that the reassessment was unjustified as the AO failed to demonstrate the deficiency in the petitioner's explanation. The court set aside the notice under Section 148 and the order rejecting objections.

Conclusion:
The court ruled in favor of the petitioner/assessee, setting aside the notice and the order rejecting objections. The writ petition was disposed of accordingly.