2018 (2) TMI 368 - HC - Income Tax

Reopening of assessment - failure on part of the assessee to disclose true and full facts - contribution made towards the fund and the agreement of the LIC to manage the fund - Held that - In the present case, the petitioner had raised a claim and had also placed all necessary computation on record in connection with such a claim. It is of course true that the contribution to the gratuity scheme itself was not sufficient to enable an assessee to claim deduction. Additional requirement that such scheme in which the contribution is made must also have been approved by the Commissioner is undisputable. In normal case therefore, nondisclosure of such claim not being approved, if such was the fact, may amount to not disclosing true and full facts. According to the petitioner, factually, the scheme was approved by the Commissioner way back in the year 1976. It was only after it, the LIC would undertake the responsibility to manage the same. It was on this basis that the petitioner had been raising the claim year after year right since its inception every year. In none of the past years, any such issue was raised by the Assessing Officers in this respect. Therefore, the petitioner produced what it had been producing all along namely, the contribution made towards the fund and the agreement of the LIC to manage the fund. If the Assessing Officer had any doubt about such a claim, it was always open for him to examine it, ask the petitioner to fulfill further requirements. Merely because the petitioner did not provide an additional declaration in the return that the scheme though approved, the petitioner is unable to produce a copy of the order approved by the Commissioner after long gap of time, cannot be categorized as failure on the part of the petitioner to disclose truly and fully all material facts. Only on this ground, we are inclined to quash the notice. - Decided in favour of assessee

Summary

Issues:
Challenge to notice for reopening assessment for AY 2010-11 based on gratuity expenses deduction.

Detailed Analysis:

1. Challenge to Reopening Notice:
The petitioner, a co-operative bank, challenged a notice dated 29.03.2017 issued by the Assessing Officer to reopen the assessment for the assessment year 2010-11. The notice was issued beyond the four-year period from the end of the relevant assessment year. The Assessing Officer sought to disallow the deduction claimed by the petitioner towards gratuity expenses amounting to ?65 lacs, stating that the gratuity scheme was not approved as required by section 36(1)(v) of the Income Tax Act.

2. Change of Opinion and Disclosure of Material Facts:
The Assessing Officer rejected the petitioner's objections to the notice and proceeded with reassessment, citing that fresh facts had come to light. The High Court analyzed whether it was a case of change of opinion or if there was a failure on the part of the petitioner to disclose all material facts necessary for assessment. The court noted that the petitioner had consistently claimed the deduction for gratuity expenses, supported by documents and agreements with LIC dating back to 1976. The Assessing Officer had not raised any queries during the original assessment regarding the approval of the gratuity scheme.

3. Examination of Facts and Conclusion:
The court observed that the petitioner had provided all relevant details and computations regarding the gratuity scheme, including the agreement with LIC, which indicated the scheme's approval. The court emphasized that the failure to provide an additional declaration in the return about the approval, due to the long passage of time since the scheme's approval in 1976, did not amount to a failure to disclose all material facts. Consequently, the court quashed the notice for reopening the assessment, allowing the petition and disposing of the matter.

In conclusion, the High Court set aside the impugned notice for reopening the assessment for the AY 2010-11, emphasizing that the petitioner had not failed to disclose all material facts necessary for assessment. The court clarified that the decision did not express an opinion on the petitioner's actual claim for deduction, leaving it open for the Assessing Officer to examine the claim in accordance with the law in any validly raised assessment year.