2013 (5) TMI 616 - HC - Income Tax

Re opening of assessment - write back of any provision is deductible provided the same is added back while computing taxable income of the year in which it was created which was not done in the case of the assessee during the course of assessment proceedings - Held that - the conclusion of the Assessing Officer, which was recorded in the reasons, was borne out from the verification of the case record. Further, as pointed out by the counsel for the petitioner, in the return filed by the petitioner for the assessment year 2005-06 clearly the statement of total taxable income included the deduction of provision of written back of Rs.52.22 crores. Such provision was explained in the notes forming part of the income-tax return, in which it was clarified that such amount was being written back of excess provision for doubtful debts as per RBI Prudential Norms and provision for contingencies made in the earlier years, which are not in the nature of income and not liable to tax under Section 41(1) of the Act. If the AO did not have the accounts for the earlier year, surely during the course of assessment, he could have called for such details. Having chosen not to do so, his attempt to reopen the just assessment after a period of four years from the end of relevant assessment year, must fail. Thus AO belief that the income chargeable had escaped assessment lacks validity. In favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reopening assessment for the assessment year 2005-06.

Analysis:
1. The petitioner, National Dairy Development Board (NDDB), challenged a notice issued by the Assistant Commissioner of Income Tax under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the assessment year 2005-06. The petitioner was previously exempt from income tax but lost this exemption starting from the assessment year 2003-04. The notice was based on the claim that a provision written back by the NDDB in earlier years, amounting to Rs.52.22 crores, should have been included as income for the assessment year 2005-06.

2. The Assessing Officer believed that the provision written back by the NDDB was income for the assessment year 2005-06 and should have been included in the total income. The petitioner contended that there was no failure to disclose material facts, as the provision was clearly mentioned in the return filed for the assessment year. The petitioner also cited a previous judgment where a similar notice for a different assessment year was quashed.

3. The Court found that the notice lacked legal validity as it was issued beyond the permissible period of four years from the end of the relevant assessment year. The Court noted that the provision written back was disclosed in the return filed by the petitioner, and the Assessing Officer could have scrutinized it if necessary. The Court also referenced a previous judgment where a similar notice for a different assessment year was quashed based on similar grounds of disclosure and assessment validity.

4. The Court concluded that the notice lacked legal validity due to the absence of failure to disclose material facts by the petitioner and the Assessing Officer's failure to scrutinize the claim in the original assessment. The Court upheld the petitioner's contentions and quashed the notice to reopen the assessment for the assessment year 2005-06.

This detailed analysis covers the issues involved in the legal judgment comprehensively, highlighting the key arguments presented by both parties and the Court's reasoning for its decision.