2021 (6) TMI 557 - HC - Income Tax

Reopening of assessment u/s 147 - disallowance u/s 36(i)(ii) for directors remuneration - Assessee argued absence of any fresh material in the possession of the AO and that too after the expiry of four years - HELD THAT - For the assessment year 2008-2009, the assessment was sought to be reopened on similar grounds under a similar notice Section 148 of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) vide order dated 15.12.2017 has dropped the proceeding. Reopening of the completed assessment based on change of opinion has been frowned upon by the Apex Court by its several decisions. The decision cited by the petitioner are squarely applicable facts and circumstances of the case. Even if the matter is remitted back to the respondents to pass a speaking order, no useful purpose would be served as the respondents appear to have accepted the views of the Commissioner of Income Tax (Appeals) vide order dated 15.12.2017 for the assessment years 2008-2009 under similar circumstances. The respondents have also not produced any documents to show that the said order of the Commissioner of Income Tax (Appeals) has been appealed against before the Income Tax Appellate Tribunal and an Appeal is pending as on dated. Therefore, even on merits it is not permissible to the respondents to proceed with the impugned proceeding contrary to the said order. As an assessing officer, the respondent cannot take a different view for the assessment year 2007-2008 from the view is taken for the assessment year 2008-2009 by the Commissioner of Income Tax (Appeals) in the light of the decision of the Hon'ble Supreme Court, Union of India Vs Kamalakshi Finance Corporation Limited 1991 (9) TMI 72 - SUPREME COURT - This Court is inclined to allow this writ petition.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act for reopening Assessment for 2007-2008.

Analysis:
The petitioner contested a notice dated 29.03.2014 under Section 148 of the Income Tax Act seeking to reopen the Assessment for the year 2007-2008. The reasons for reopening were related to disallowance of payments made to a director. The petitioner argued that there was no ground for reopening as there was no suppression of information. A similar situation occurred for the Assessment year 2008-2009, where the demand was dropped by the Commissioner of Income Tax (Appeals) due to lack of fresh material or failure to disclose all facts. The petitioner emphasized that the assessment was completed based on disclosed information and referred to relevant case laws to support their stance.

The petitioner further presented details of remuneration paid to the Chairman cum Managing Director, emphasizing that all relevant information was disclosed in financial statements and audit reports. The Assessing Officer had disallowed some expenses and rectified missed items under Section 154. The petitioner argued against invoking the extended period of limitation under Section 147 and cited judgments supporting their position.

The respondent defended the reopening of the Assessment, citing the scope of Section 147 and amendments. They argued that mere production of documents does not constitute full disclosure. Despite the petitioner's submissions of audit reports and returns, the respondent claimed there was no true and full disclosure at the time of filing. The respondent contended that the Assessment reopening was justified under the amended provisions of the Income Tax Act.

The Court considered both parties' arguments, noting that the petitioner had made adequate disclosures for the assessment year 2007-2008. The Court highlighted the dropping of proceedings for the assessment year 2008-2009 by the Commissioner of Income Tax (Appeals) and emphasized that reopening based on a change of opinion was discouraged by previous judgments. The Court found that the respondent could not take a different view from the Commissioner of Income Tax (Appeals) and ruled in favor of the petitioner, allowing the writ petition and closing the case without costs.