2022 (2) TMI 528 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - notice after expiry of four years - Entitlement to deduction on interest paid on housing loan from HDFC Ltd - HELD THAT - The notice for re-opening has been issued after expiry of four years from the end of the relevant assessment year and the scrutiny and assessment u/s 143(3) of the Act having been done, the proviso to Section 147 of the Act shall be applicable. As per proviso there is a bar to re-open any assessment after expiry of four years from the end of assessment year unless revenue is able to show that there was failure on the part of the assessee to truly and fully disclose all material facts required for assessment for the relevant assessment year. Now, let us examine whether the reasons recorded for re-opening disclose any such information not disclosed by petitioner. In our view, there is nothing to indicate that there was non disclosure on the part of petitioner. Interest expense cannot be allowed as a deduction to the assessee either under Section 24(b) or under section 57 - Mr.Suresh Kumar submitted that by claiming deduction under Section 57 of the Act and not under Section 24(b) of the Act would also amount to nondisclosure. Mr. Suresh Kumar submitted that disclosure of material facts with respect to the setting off of the interest expenses under Section 57 of the Act might be full but it cannot be considered as true and it is failure on the part of the assessee. Mere production of books of accounts or other documents are not enough in view of explanation 1 to Section 147 of the Act. These submissions of Mr. Suresh Kumar cut no ice with us. ll the points raised in the reasons recorded have been considered during the assessment proceeding. In as much as, query was raised regarding the loan taken and utilisation thereof during the assessment proceeding. It is evident from letter dated 5th December, 2008 addressed by petitioner s Chartered Accountants to respondent by which petitioner had forwarded details of Secured Loans alongwith utilisation thereof and balance as per books of accounts as on 31st March, 2006 and details of interest paid as shown under the head Financial Expenses. Of course, with the said letter various other details were also provided. Therefore, there has been query raised and query has been answered. Assessment Order of ITAT has attained finality for A.Y. 2009-10. If the ITAT has held that petitioner was entitled to the housing loan deduction and interest paid for housing loan from HDFC Ltd., thereby reversing the findings of the Assessing Officer as well as CIT (A) for A.Y. 2009-10, the entire basis in the reasons for re-opening for A.Y. 2006-07 also has collapsed. - Decided in favour of assessee.

Summary

Issues:
Impugning a notice under Section 148 of the Income Tax Act, 1961 for A.Y. 2006-07 and rejection of objections against the re-opening of assessment.

Analysis:
1. The petitioner challenged a notice dated 8th March, 2013, issued under Section 148 of the Income Tax Act, 1961, for the assessment year 2006-07, along with the order rejecting objections on 19th September, 2013. The return of income was initially accepted under Section 143(1) but later scrutinized under Section 143(3), resulting in a revised total income assessment.

2. The notice for re-opening was issued after the four-year limitation period, triggering the proviso to Section 147 of the Act, which requires the revenue to show failure on the part of the assessee to fully disclose material facts. The court analyzed the reasons for re-opening and found no indication of non-disclosure by the petitioner.

3. The respondent argued that the petitioner's deduction claim under Section 57 instead of Section 24(b) constituted non-disclosure. However, the court disagreed, citing the duty of the assessee to disclose all primary facts but not to draw legal inferences for the assessing authority.

4. The court emphasized that all points raised during the assessment proceedings were duly considered, including queries regarding loans and their utilization. The law dictates that once a query is raised and answered during assessment, it is deemed to have been considered by the Assessing Officer.

5. The Assessing Officer's belief that income had escaped assessment based on available records was deemed insufficient for re-opening, especially when relying on past assessments where conflicting decisions were made and upheld by higher authorities.

6. Ultimately, the court allowed the petition, setting aside the notice for re-opening and the order rejecting objections, as the basis for re-opening collapsed due to final decisions in related assessment years. The judgment highlighted the importance of full disclosure by the assessee and the limitations on re-opening assessments based on changing opinions or past decisions.