High Court quashes assessment notice for AY 2010-11 due to no genuine tax evasion. CBDT circular prevails.

The High Court quashed the notice seeking to reopen the assessment for Assessment Year 2010-11 as the income chargeable to tax had not genuinely escaped assessment. The court emphasized that the service tax component was not chargeable to tax as per the CBDT circular and the Assessing Officer's reasoning. Therefore, there was no valid reason for reopening the assessment. The petition was disposed of accordingly.

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Issues:
1. Challenge to notice for reopening assessment for Assessment Year 2010-11.
2. Contentions raised by the petitioner.
3. Opposition by the Department.
4. Question of income escaping assessment.

Analysis:
The petitioner challenged a notice dated 30.03.2015 seeking to reopen the assessment for the year 2010-11. The Assessing Officer believed that income of Rs. 8,23,397 had escaped assessment due to the petitioner not accounting for service tax correctly. The petitioner contended that the original assessment scrutinized various income heads, including rental income, and any addition now would be a change of opinion. Additionally, the petitioner argued that the service tax should not be considered as income as per CBDT circular and the ultimate tax liability would remain the same even with the addition. The Department opposed, stating that the issue was not examined during the original assessment, and the petitioner should have disclosed gross rental income. They argued that even under Section 115JB assessment, the loss would reduce with the addition.

The High Court focused on whether the income chargeable to tax had genuinely escaped assessment. The Assessing Officer believed the petitioner should have shown gross rental income of Rs. 44.23 lacs, including service tax, instead of Rs. 36 lacs. However, the court noted that regardless of how the income was presented, the ultimate tax liability would not change. The court emphasized that the service tax component was not chargeable to tax as per the CBDT circular and the Assessing Officer's own reasoning. Therefore, as long as the income chargeable to tax had not escaped assessment, there was no valid reason for reopening the assessment.

In conclusion, the High Court quashed the impugned notice dated 30.03.2015, stating that the reopening of the assessment was not permissible as the income chargeable to tax had not genuinely escaped assessment. The petition was disposed of accordingly.

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