2023 (11) TMI 595 - HC - Income Tax

Reopening of assessment - Reasons to believe - assessee case was selected for scrutiny under CASS and the assessment was completed u/s 143(3) after accepting the returned income - HELD THAT - This was a case where petitioner had filed its return of income for Assessment Year 2014-15 admitting NIL income. The proviso to Section 147 provides that notice to reopen can be issued only if there is failure to truly and fully disclosed if the notice is being issued after the expiry of four years from the end of relevant assessment year. The assessment year is A.Y. 2014-15 and the notice is dated 30th March 2021. Hence the proviso will apply. From the reasons as quoted above, it is quite clear that the material on which A.O has relied upon are those available from the documents filed by petitioner. The reasons state As seen from the Profit Loss Account (Notes 26 Movement Employee Benefits Expenses), assessee had debited provision for employee related disputes to the extent of Rs. 3,10,00,000. However, in the statement of computation of income, while arriving at the income as per normal provisions, the remaining provision debited in the Profit Loss Account of Rs. 30,00,000 needs to be brought to tax. In the affidavit in reply filed through one Ms. R.P. Anuradha affirmed on 30th October 2023 it is admitted that assessee has furnished complete details, information, documentary evidences and explanation as required by the learned A.O. during the assessment proceedings but strangely it is stated that the requisite material fact as noted in the reasons for reopening were embedded in such a manner that material evidence could not be discovered by the A.O. This is nothing but a bald statement because the reasons itself indicates that the material fact was picked up from the Profit Loss Account Notes 26 and the statement of computation of income while arriving at the income as per normal provisions. The reasons does not also state that the material fact was embedded in such a manner that material evidence could not be discovered. It is settled law that what is not there in the reasons cannot be improved upon in the affidavit or during the course of argument. Decided in favour of assessee.

Summary

Issues involved:
The issues involved in this judgment are the validity of a notice issued under Section 148 of the Income Tax Act, 1961, and the rejection of objections by the petitioner.

Validity of Notice under Section 148:
The petitioner challenged a notice dated 30th March 2021 issued under Section 148 of the Income Tax Act, 1961, and the subsequent order rejecting the petitioner's objections. The petitioner contended that the reopening was unlawful as there was no indication in the reasons recorded to suggest an escapement of income due to failure to fully disclose material facts. The notice was issued almost six years after the assessment for the relevant year, based on discrepancies in the provision for employee-related disputes as per the Profit and Loss Account. The petitioner argued that all relevant details were provided during the assessment proceedings, and there was no failure to disclose material facts.

Proviso to Section 147 and Material Facts Disclosure:
The proviso to Section 147 of the Act states that a notice for reopening can be issued only if there is a failure to fully disclose material facts, especially after the expiry of four years from the end of the relevant assessment year. In this case, the notice was issued for Assessment Year 2014-15, dated 30th March 2021, making the proviso applicable. The court noted that the reasons for reopening were based on information already available from the documents filed by the petitioner. The court emphasized that the absence of material facts in the reasons cannot be supplemented later, as per settled law.

Court's Decision:
After considering the arguments and evidence presented, the court found that there was no indication of a failure on the part of the petitioner to fully disclose material facts. Consequently, the court made the Rule absolute in favor of the petitioner, quashing the Impugned Notice dated March 30, 2021, the Impugned Scrutiny Notice dated November 15, 2021, and the Impugned Order dated December 15, 2021. The petition was disposed of accordingly.