2011 (1) TMI 1105 - HC - Income Tax

Reopening of assessment - Excess depreciation - Held that - Adding the said amount to the amount computed under the ordinary provisions of the Income-tax Act, the aggregate amount even as per the Assessing Officer comes to Rs. 4,05,930 which is less than the amount of tax paid by the petitioner on being assessed under section 115JB of the Act thus when the tax payable as per the reasons recorded is less than the tax paid by the petitioner under the assessment framed under section 143(3) of the Act, the question of any income having escaped assessment does not arise - The order recording reasons itself indicates that in fact no income has escaped assessment and as such there is no basis for the formation of belief that income has escaped assessment - Decided in favor of the assessee

Summary

Issues involved:
Challenge to notice under section 148 of the Income-tax Act, 1961 for reopening assessment for the assessment year 2005-06 based on alleged escapement of income due to excess depreciation claimed.

Detailed Analysis:

1. Notice under Section 148:
The petition challenges the notice dated March 25, 2010, issued by the respondent under section 148 of the Income-tax Act, 1961, reopening the assessment for the assessment year 2005-06. The petitioner, a company engaged in consultancy, advisory, and electricity generation through renewable sources, filed its return of income under section 139(1) accompanied by audited accounts and audit report under section 44AB. The Assessing Officer framed the assessment under section 143(3) but subsequently reopened it based on alleged escapement of income due to excess depreciation claimed by the petitioner.

2. Grounds for Reopening:
The sole ground for reopening the assessment was the alleged excess depreciation claimed by the petitioner, resulting in underassessment of income. The petitioner had been assessed under section 115JB of the Act and paid tax accordingly. The petitioner contended that the tax effect computed by the Assessing Officer was less than the tax paid under section 115JB, indicating no escapement of income. The petitioner argued that the formation of belief regarding escapement of income lacked any basis, urging the quashing of the notice on this ground.

3. Validity of Reopening:
The petitioner argued that the reopening was based on a mere change of opinion and the material for reopening was an audit objection, lacking new material to form a valid reason to believe in income escapement. The respondent, through its senior advocate, could not refute the petitioner's submission that no income had escaped assessment, as the tax paid exceeded the amount computed for reopening. The court found that the tax payable as per the reasons recorded was less than the tax paid by the petitioner under the initial assessment, indicating no income escapement. Consequently, the court held that the Assessing Officer lacked jurisdiction to issue the notice under section 148, quashing the notice and all related proceedings.

4. Judgment:
The court allowed the petition, quashing the notice dated March 25, 2010, issued under section 148 of the Act, along with all proceedings pursuant to it. The court held that the assumption of jurisdiction by the Assessing Officer was without basis, as the pre-condition for reopening assessment under section 147, i.e., the belief that income had escaped assessment, was not satisfied. The court made the rule absolute with no order as to costs.