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2022 (5) TMI 941 - AT - Income TaxReopening of assessment u/s 147 - Notice beyond period of four years - disallowance of prior period expenses and MAT - Whether the assessee disclosed fully and truly all material facts necessary for the assessment? - HELD THAT - In the present case, the financial statements for year ended March 31, 2010 disclosed the prior period expenses on the face of the profit and loss account itself as well as the break- up of the same is depicted at Schedule 16 of the financial statements - Tax Audit Report (TAR) in Form 3CD for AY 2010-11 of TAR and attachment 9 of TAR depict the prior period expenses -. A copy of the TAR has been duly furnished before the AO vide Annexure-4 of submission dated May 30, 2013. The computation of Income including the MAT ( Minimum Alternative Tax ) computation under section 115JB of the Act along with Form 29B for AY 2010-11 depicts that the Company had disallowed the prior period expense in the normal computation of income. Further, the same is not disallowed in the MAT computation in line with Form 29B for the subject year. The said documents been duly furnished before the AO vide Annexure-2 and Annexure-3A of the submission dated May 30, 2013. Thus, in the present case, there is no failure on the part of the Appellant to file its Return of Income. Further, the Appellant has disclosed fully and truly all material facts necessary for his assessment. The facts have been duly disclosed in the Tax Audit Report and vide the Profit and Loss Account. Hence keeping in view the proviso to the section 147, the reassessment proceedings initiated under section 147 of the Income Tax Act 1961 beyond a period of four years are bad in law and deserve to be quashed. Appeal of assessee allowed.
Issues Involved:
1. Validity of reassessment proceedings under section 147/148 of the Income Tax Act, 1961. 2. Addition of prior period expenses in the computation of book profits under section 115JB. 3. Charging of interest under section 234B and section 234C. 4. Short credit of taxes paid on account of TDS/advance tax/self-assessment tax. Issue-Wise Detailed Analysis: 1. Validity of Reassessment Proceedings under Section 147/148: The assessee challenged the reassessment proceedings on the grounds that they were barred by limitation as per the proviso to section 147 of the Income Tax Act, 1961. The assessee argued that there was no failure on their part to disclose fully and truly all material facts necessary for assessment. The reassessment was based on an audit objection without any independent reason or tangible material with the Assessing Officer (AO). The reassessment proceedings were also claimed to be based on a change of opinion on the same set of facts considered during the original assessment under section 143(3). The tribunal noted that the return of income for the relevant assessment year was filed on 30.09.2010, and the prior period expenses were disclosed in the Profit and Loss Account and the Tax Audit Report. The computation of income, including MAT computation, was also provided. The tribunal held that there was no failure on the part of the assessee to disclose all material facts necessary for assessment. Therefore, the reassessment proceedings initiated beyond four years were deemed bad in law and quashed. 2. Addition of Prior Period Expenses in Computation of Book Profits under Section 115JB: The AO had disallowed the deduction of prior period expenses amounting to INR 1,08,63,174 in the computation of book profits under section 115JB, contending that book profits should be calculated based on current year operational profits. The tribunal observed that the prior period expenses were disclosed in the financial statements and the Tax Audit Report. The assessee had disallowed these expenses in the normal computation of income but not in the MAT computation, as per Form 29B. The tribunal concluded that the assessee had disclosed all material facts fully and truly, and the reassessment proceedings were invalid. Consequently, the addition of prior period expenses to the book profits was also invalid. 3. Charging of Interest under Section 234B and Section 234C: The assessee contended that the AO erred in charging interest under sections 234B and 234C of the Act. However, since the reassessment proceedings were quashed, the tribunal did not specifically address this issue in detail. 4. Short Credit of Taxes Paid on Account of TDS/Advance Tax/Self-Assessment Tax: The assessee claimed that the AO had erred in providing short credit for taxes paid on account of TDS/advance tax/self-assessment tax. Similar to the interest issue, this was not specifically addressed in detail due to the quashing of the reassessment proceedings. Conclusion: The tribunal allowed the appeal of the assessee, quashing the reassessment proceedings under section 147/148 as they were initiated beyond the permissible period and without failure on the part of the assessee to disclose material facts. Consequently, the addition of prior period expenses to the book profits was also invalidated. The order was pronounced in the open court on 09/05/2022.
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