2023 (8) TMI 1079 - HC - Income Tax

Reopening of assessment u/s 147 - Notice beyond period of four years - reasons to believe or suspect -HELD THAT - It is settled law that where the assessment is sought to be reopened after the expiry of a period of four years from the end of the relevant year, the proviso to Section 147 of the Act stipulates a requirement that there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary. Provision for doubtful debts - If we consider the reasons for reopening we would first of all observe that the Assessing Officer records Since the provision is made on account of bad and doubtful debts which is not an ascertained liability as per section 115JB the same need to be added which the assessee has failed to do so. This indicates non application of mind by the Assessing Officer while recording the reasons and also by the approving authority which granted approval under Section 151 of the Act. Further, in ITR Form 6 filed under Section 139(1) of the Act in clause 40 of Part A - P L account sum was disclosed as provision for doubtful debts and in Schedule relating to MAT, petitioner disclosed the working of book profit - Petitioner in Note No. 24 to the accounts disclosed the provision for bad and doubtful debts. Provision for bad and doubtful debts is in Note No. 14 Trade Receivables of the Audited Accounts as a reduction from trade receivables and also in Note No. 24 Other Expenses . Audited accounts were filed during the course of assessment proceedings - respondent no. 1 records that the details called for have been filed and discussed with petitioner and the book profit is calculated by respondent and is brought to tax under Section 115JB of the Act. Based on these facts, there is no failure to disclose any material facts necessary for the assessment so as to invoke provision of Section 147 of the Act after a period of four years from the end of the relevant assessment year. The details have been filed in the course of the assessment proceedings and respondent no. 1, after examining the details, has computed the income under regular provisions of the Act and profit u/s 115JB. Deduction u/s 35(2AB) - There is no failure to disclose any facts necessary for the assessment, but on the contrary the claim of deduction u/s 35 was examined by raising a specific query and after going through the details filed in the course of the assessment proceedings, the same was allowed in the assessment order. The impugned proceedings would amount to review of the earlier order without any fresh tangible material on record and, therefore, the impugned proceedings are wholly without jurisdiction, illegal and bad in law. Under Rule 6(7A), the Department of Scientific and Industrial Research is required to submit its report to the Income Tax Authorities in Form 3CL. There is no requirement of the assessee to file the said form, but Form No. 3CL is required to be submitted by the Department of Scientific and Industrial Research to the Income Tax Authorities. Therefore, the allegation of failure to file the said form cannot be attributed to petitioner. Loss on sale of asset - Such amount has been disclosed in Note No. 24 of the P L account. The said amount is also disclosed in ITR-6 form at Item 38 of Part A. Respondent no. 1 had called for details of depreciation claimed on the assets vide letter dated 1st December 2015. Respondent no. 1, after perusing the details filed, made an assessment under Section 143(3) of the Act computing the assessed income under the regular provisions of the Income Tax and book profit under Section 115JB of the Act. There is no failure to disclose material facts necessary for the assessment but on the contrary the assessment has been made after calling for the details. Therefore, the impugned proceedings would amount to review of the earlier order without there being any fresh tangible material on record. Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of reopening assessment under Section 148 of the Income Tax Act, 1961.
2. Alleged failure to disclose material facts necessary for assessment.
3. Change of opinion by the Assessing Officer.
4. Jurisdictional conditions for reassessment after four years.

Summary:

1. Validity of Reopening Assessment:
The petitioner challenged the notice dated 23rd March 2021 issued under Section 148 for reopening the assessment for AY 2013-2014 and the subsequent order dated 18th January 2022 disposing of the petitioner's objections. The petitioner argued that the reassessment proceedings were based on details already furnished during the original assessment, thus not satisfying the jurisdictional condition of failure to disclose primary facts.

2. Alleged Failure to Disclose Material Facts:
The petitioner had disclosed all necessary details during the original assessment, including deductions under Section 35, provision for bad and doubtful debts, and loss on sale of assets. The court noted that the details were filed and discussed with the Assessing Officer, who computed the income accordingly. The court held there was no failure to disclose material facts necessary for the assessment, thus invoking Section 147 after four years was not justified.

3. Change of Opinion:
The court observed that the reasons recorded for reopening were based on materials already filed during the original assessment. The court emphasized that a change of opinion does not constitute valid grounds for reopening an assessment. The court cited previous judgments to support that reopening based on a mere change of opinion is not permissible under the Act.

4. Jurisdictional Conditions for Reassessment:
The court reiterated that for reopening an assessment after four years, there must be a failure to disclose fully and truly all material facts necessary for the assessment. The court found that the reasons for reopening did not disclose any new tangible material but were based on the same facts already examined. The court held that the reassessment proceedings were without jurisdiction, illegal, and bad in law.

Conclusion:
The notice dated 23rd March 2021 under Section 148 and the order dated 18th January 2022 were quashed and set aside. The court disposed of the petition with no order as to costs.