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2024 (6) TMI 525 - AT - Income TaxRe-opening u/s 147/148 - MAT liability as per book profits computed u/s 115JB of the Act would not get disturbed on correct application of law and tax on such book profits also exceeds the total income determined as per normal provisions - case has been reopened to adjust the book profits as well as to assess escaped income under normal provisions - HELD THAT - One cannot say that when the adjustment on account of such provision for repairs have been made by the assessee while determining the income as per normal provisions of the Act there was a failure on the part of the assessee to disclose facts in not making such corresponding adjustments while determining the book profit. The disclosures were also made in Financial Statement. The condition of 1st proviso is thus clearly not satisfied in the instant case. Hence the escapement qua book profits are not sustainable in law. As a sequel to such plea the assessee thus submits that in the absence of escapement qua book profits the escapement alleged under normal provisions are of no consequence since despite the purported escapement qua normal provision may led to enhancement of taxable income under normal provision the tax liability thereon would be lower than the book profits assessable in law. On facts thus the assessee argues that tax liability on book profits under s. 115JB amounting to Rs. 31, 04, 38, 156/- without provision for repair which adjustment is impermissible in reassessment proceedings exceeds the tax liability on Rs. 13, 67, 21, 152 income assessed earlier under s. 143(3) plus the income allegedly escaped under normal provision . On such facts it is the plea of the assessee that its case is covered by the judgment rendered in the case of Motto Tiles P. Ltd. 2016 (6) TMI 381 - GUJARAT HIGH COURT . As in the case of India Gelatine and chemicals Ltd. 2015 (2) TMI 808 - GUJARAT HIGH COURT observed that even if the entire amount which is proposed to be added by the AO is sustained there would be no addition to the tax liability of the assessee and the petitioner would be still governed by the provisions of S. 115JB of the Act and would be assessed on same book profit. In such circumstances reopening of assessment was not found sustainable. The Hon ble Gujarat High court in the case of Motto Tiles P. Ltd. 2016 (6) TMI 381 - GUJARAT HIGH COURT has reiterated the ratio yet again. The claim of the assessee that the tax liability on book profit is higher than the income assessable under normal provisions including escapement alleged qua normal provisions has not been disputed by the revenue. Governed by the view expressed in the decisions noted above we find merit in the plea raised by the assessee towards lack of jurisdiction on first principles. The re-assessment notice is accordingly quashed. The re- assessment order is declared null and void. As the assessee succeeds on absence of jurisdiction usurped u/s 147 of the Act which strikes to the root of the matter the merits of additions and disallowances carried out merges in void at the threshold. Hence we do not seek to delineate on the merit of additions and disallowances as challenged on behalf of the assessee and Revenue in their respective appeals. Appeal of the assessee is allowed.
Issues Involved:
1. Jurisdiction assumed u/s 147 of the Income Tax Act, 1961. 2. Efficacy of the re-assessment order passed. 3. Merits of additions and disallowances made in the re-assessment. Summary: 1. Jurisdiction Assumed u/s 147 of the Act: The assessee challenged the jurisdiction assumed u/s 147 of the Act, arguing that the re-assessment proceedings initiated after four years from the end of the assessment year were barred by limitation as per the First Proviso to Section 147. The assessee contended that there was no failure on its part to disclose fully and truly all material facts necessary for assessment. The Tribunal agreed, noting that the conditions of the First Proviso were not satisfied, and thus, the escapement of book profits was not sustainable in law. 2. Efficacy of the Re-assessment Order: The Tribunal examined whether the re-opening of the assessment was maintainable when the tax liability under Section 115JB (book profits) exceeded the tax liability under normal provisions. The Tribunal referred to the decisions of the Hon'ble Gujarat High Court in the cases of India Gelatine and Chemicals Ltd. and Motto Tiles P. Ltd., which held that re-opening of assessment is not sustainable if there is no resultant change in tax liability. The Tribunal found merit in the assessee's plea that the tax liability on book profits was higher than the income assessable under normal provisions, including the alleged escapement. Consequently, the re-assessment notice was quashed, and the re-assessment order was declared null and void. 3. Merits of Additions and Disallowances: As the assessee succeeded on the jurisdictional issue, the Tribunal did not address the merits of the additions and disallowances made in the re-assessment. The merits of the additions and disallowances merged in void at the threshold due to the lack of jurisdiction. Conclusion: The appeal of the assessee was allowed, and the cross-appeal of the Revenue was dismissed. The re-assessment notice and order were quashed due to the absence of jurisdiction u/s 147 of the Act. Order Pronounced: The order was pronounced in the open Court on 10/05/2024.
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