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TMI Blog2025 (3) TMI 414X X X X Extracts X X X X X X X X Extracts X X X X ..... return of income, the petitioner offered guarantee fees charged to its Associate Enterprise (AE) amounting to Rs. 152.66 crore by taking 1.5% of the guarantee amount as the basis. This figure of Rs. 152.66 crore was credited to the profit and loss account. However, in March 2016, the petitioner realized that they have offered guarantee fee more than what was required and therefore revised the return of income by offering Rs.34.07 crore. This was done by reducing Rs. 118.59 crore in revised return of income. The net effect was that the petitioner offered Rs.34.07 crore of income as guarantee fees. However, since the accounts for the financial year 2013-14 relevant to AY 14-15 were closed, the petitioner in the account of financial year 2015-16 reversed the guarantee fee amounting to Rs. 118.59 crore. 4. In the revised return of income for AY 2014-15, the petitioner under the heading 'allowable deductions' in (xiii) reduced the guarantee fee receivable pertaining to financial year 2013-14 but booked in financial year 2015-16 amounting to Rs. 118.59 crore. In the note annexed to the said revised return of income, being note No.16 read as under ; 'The company has revised the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviding the reasons, calling upon the petitioner to file its return of income. The said notice was replied by the petitioner vide letter dated 18 November 2021 wherein the petitioner once again requested the revised return filed in March 2016 to be taken as return pursuant to Section 148 notice. The petitioner also enclosed a copy of the said return. 8. On 24 March 2022, the assessing officer issued a show cause cum draft assessment order and called upon the petitioner to reply to the same within one day, i.e. by 25 March 2022. In the draft order, for the first time, the reasons recorded were reproduced and furnished to the petitioner. 9. The reasons, as produced in the draft order, read as under: As per reason recorded for the re-opening of the case, the relevant part is reproduced here - "The deduction claimed by the assessee in computation of income is not admissible due to following reasons: 1. Reversal of income accounted under guarantee fee in FY 2013-14 is reportedly done in the books for FY 2015-16. Hence if at all deduction is allowable based on audited books for the FY 2015-16, it is allowable only in AY 2016-17 relevant to FY 2015-16 that too subject to confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eriod of 4 years from the end of the relevant assessment year and in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment, the reassessment notice and the proceedings are bad in law. He further submits that the issue of "guarantee fees" is pending before the Tribunal and therefore even on this account the impugned proceedings are barred by the 3rd proviso to Section 147 of the Act. He further submitted that in the assessment order addition of Rs. 120.8 crore on account of "guarantee fee income" has been made and therefore there cannot be any case for the very same amount having escaped the assessment so as to confer jurisdiction on the respondents for reopening the case. He also submitted that there is no fresh tangible material and the present proceedings are nothing but would amount to change of opinion on the issue which was examined during the course of the regular assessment proceedings. 15. Mr. Mistri, learned Senior Counsel for the petitioner also has raised various other grounds which we do not propose to reproduce and adjudicate in this petition but leave it open to be decided in appropriate c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,58,621 which has been accounted as reversal of guarantee income in the books of FY 2015-16. It is stated for tax purpose, the reversal has been given effect to in FY 2013-14 itself. The deduction claimed by the assessee in computation of income is not admissible due to following reasons; 1. Reversal of income accounted under guarantee fee in FY 2013-14 is reportedly done in the books for FY 2015-16. Hence if at all deduction is allowable based on audited books for the FY 2015-16, it is allowable only in AY 2016-17 relevant to FY 2015-16 that too subject to confirmation that it is written off in the books. 2. (ii) If the deduction is allowed in AY 2014-15, this tantamount to allowing bad debts of AY 2016-17 in AY 2014-15 as the income is offered in AY 2014-15. As per the provisions of section 36(2), bad debts is allowable only in the year income is written off. Hence no deduction can be allowed in AY 2014-15. 3. Department does not have any mechanism to watch whether assessee has offered the amount in the computation of income relevant to AY 2016-17 if the same is claimed in the AY 2014-15. 4. DRP-2, in its order dated 27th September 2018 at para 46 confirmed the ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year. Provided also that the Assessing Officer "may assess or reassess such income, other than the income involving matters wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that 'at note No.16 attached to the computation of income.....revised the guarantee fee...'. This indicates that the reasons are based on the documents forming part of the original assessment proceedings. There is no fresh tangible material that has been referred to in the reasons annexed to the reply, which would empower the assessing officer to reopen the case, more so after a period of 4 years. 23. The reasons appearing in the draft assessment order and to the reply filed by the respondent do not disclose what are the facts which the Petitioner has not disclosed and which were necessary for the assessment. In the absence of this statement in the reasons recorded the impugned proceedings are required to be quashed and set aside, as being without jurisdiction. 24. Admittedly, there is also no dispute that the issue of "guarantee fee" is pending before the Tribunal since an addition was made on this count in the original assessment proceedings. As per third proviso to section 147 of the Act, if the subject matter is pending before the Appellate Authority, then the assessing officer is debarred from initiating the reassessment proceedings on that very issue. In the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Principal Commissioner of Income-tax v. S.G. Portfolio (P.) Ltd. (2023) 151 taxmann.com 307 (Delhi) and Madras High Court in the case of Swapna Manuel v. Assistant Commissioner of Income-tax (2024) 160 taxmann.com 166 (Madras), in support of the contention that a letter filed by an assessee to treat the original return as return pursuant to 148 notice would amount to compliance of notice under Section 148 of the Act. 30. We note that the petitioner has filed an appeal after filing the present petition to obviate the limitation period and since, as held by us above, the reassessment proceedings are wholly without jurisdiction, we exercise our discretion to entertain the present petition and quash the reassessment notice under section 148 of the Act dated 30 March 2021 and consequently the assessment order passed on 20 March 2022. Mr. Mistri, learned Senior Counsel states that the petitioner would withdraw the appeal filed before the Commissioner of Income-tax (Appeal) within two weeks from the date of uploading the present order, and such appeal would be deemed to have been withdrawn. 31. For all the above reasons, the rule is made absolute in above terms and the notice ..... X X X X Extracts X X X X X X X X Extracts X X X X
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