2024 (10) TMI 95 - HC - Income Tax

Reopening of assessment u/s 147 - merely because the income u/s 115JB is more than that of the proposed addition qua the income escaping the assessment as stated in the reasons recorded once the entire assessment is reopened, AO can look into other aspects of the assessment and therefore it cannot be said that the reopening exercise would be futile exercise HELD THAT - AO after considering the information which was received with regard to the share prices movement of the Kushal Ltd. carried out on money control and after noticing that there was fluctuation in the price, has come to the conclusion that because the assessee has made transaction in the shares of the said company there was escapement of the income on the ground that the assessee had indulged in generating non-genuine gain by trading in Kusha Script on BSE during the year under consideration, except such information, no other information relating to the assessee or in connection with the transaction carried out by the assessee was recorded in the reasons by the AO. As apparent that the even if the addition is made as proposed by the AO in the reasons recorded, being the income escaped from the assessment, as the income which is taxed u/s 115JB is concerned, there would not be any taxable income after proposed addition. Petition succeeds as no fruitful purpose would be served to continue the re-assessment proceedings.

Summary

Issues:
Challenge to reopening of completed assessment for A.Y. 2017-18 - Jurisdiction of Assessing Officer - Prima facie conclusion of income escaping assessment - Assessment under Section 115JB of the Income Tax Act - Rejection of objections by Assessing Officer - Alternative remedy before CIT appeals.

Analysis:

The petitioner, a closely held company engaged in trading, filed its original return for A.Y. 2017-18 declaring total income of Rs. 52,08,790/-. The return was subjected to limited scrutiny under Section 143(2) of the Income Tax Act, followed by a notice under Section 142(1) seeking information related to Short Term Capital Gains. The Assessing Officer completed the regular assessment under Section 143(3) on 30.11.2019, making additions under Section 14(A) and Section 115JB of the Act. Subsequently, the Assessing Officer issued a notice under Section 148 on 30.03.2021, proposing to reassess the total income due to alleged non-genuine gains amounting to Rs.67,56,951/- from trading in a specific company's shares. The petitioner challenged this notice, arguing that the income was already included in the computation of total income and that the reassessment would be futile due to the higher income under Section 115JB. The petitioner's objections were rejected, leading to the present petition.

The petitioner contended that the reasons for reopening were based on borrowed satisfaction without tangible material to establish income escapement. The respondent Assessing Officer argued that the reopening was valid as new information regarding the specific company's transactions came to light post-assessment under Section 143(3). The respondent also highlighted that the Assessing Officer could consider other aspects of the assessment beyond the proposed addition amount. The court noted that the proposed addition, if made, would not result in any taxable income due to the higher income under Section 115JB, rendering the reassessment futile.

The court, after considering the submissions and reasons recorded by the Assessing Officer, concluded that continuing the reassessment proceedings would serve no purpose as the proposed addition would not impact the taxable income under Section 115JB. Consequently, the court allowed the petition, quashing and setting aside the impugned notice dated 30.03.2021. The rule was made absolute, with no order as to costs, providing relief to the petitioner in this matter.

In conclusion, the court's decision focused on the lack of tangible material for income escapement, the futility of reassessment due to higher income under Section 115JB, and the absence of fruitful purpose in continuing the reassessment proceedings. The judgment highlights the importance of jurisdictional requirements and the impact of existing income calculations on reassessment outcomes, ultimately providing relief to the petitioner in this case.