2022 (1) TMI 694 - HC - Income Tax

Court quashes assessment notice for 2012-2013

The Court quashed the notice seeking to reopen the assessment for Assessment Year 2012-2013 under Section 148 of the Income Tax Act. It found that the ... Reopening of assessment - Validity of approval granted by the CIT - earlier Revision u/s 263 dropped - Subsequently Reopening of assessment u/s 147 initiated on two grounds, first fair value of land/transferable development rights relating to 24,872.83 sq. mtrs. of land and the second one is the diminution in the value of investment in a subsidiary and debit by petitioner from the profit and loss account - HELD THAT:- The second point in the reasons for reopening has already been considered by the Principal Commissioner of Income Tax - 14 when he wished to review the assessment order under Section 263 of the said Act and the Principal Commissioner of Income Tax - 14 has also passed an order directing the proceedings initiated under Section 263 of the said Act to be dropped and the Revenue Audit to be accordingly informed that the objection raised was not accepted. Notwithstanding this order passed by the Principal Commissioner of Income Tax - 14, a notice is issued under Section 148 of the said Act and one of the ground is the same point which was directed to be dropped by the Principal Commissioner of Income Tax - 14 and the same Principal Commissioner of Income Tax - 14 has accorded the approval under Section 151 of the said Act on 30th March 2019. Therefore, this only shows that there has been total non application of mind by the Principal Commissioner of Income Tax - 14 while according the approval. If the Principal Commissioner of Income Tax - 14 had only applied his mind and considered all documents including his own order passed on 18th August 2016, he would not have granted the approval for the reasons as recorded. Mr. Suresh Kumar submitted that there are two reasons for reopening which are distinct. One is regarding the fair market value of land/transferable development rights and the other regarding diminution in the value of investment in a subsidiary and both can be segregated. It is true that both are totally different points but the fact, which is indisputable, is how could the Principal Commissioner of Income Tax - 14 grant approval for reopening relying on the reasons one of which is on an issue which the Principal Commissioner of Income Tax - 14 himself has passed an order saying that the objection raised was not correct. We have to note that in the affidavit in reply also respondents admit that the PCIT is required to accord approval on reasons recorded by the Assessing Officer after having satisfied himself that such reasons were on the basis of the technical information in possession. As held in German Remedies Ltd. [2005 (10) TMI 76 - BOMBAY HIGH COURT] to grant or not to grant approval under Section 151 of the said Act to re-open an assessment is coupled with a duty and the Commissioner was duty bound to apply his mind to the proposal put up to him for approval in the light of the material relied upon by the Assessing Officer. Such power cannot be exercised casually, in a routine and perfunctory manner. We have to observe that if only the PCIT had read the file, he would not have been satisfied with the reasons. Petition allowed. Issues:1. Assessment under Section 115JB of the Income Tax Act, 1961.2. Notice issued under Section 263 of the Income Tax Act for Assessment Year 2012-2013.3. Reopening of assessment under Section 148 of the Income Tax Act for the same year.Analysis:Assessment under Section 115JB:The petitioner filed its return of income for Assessment Year 2012-2013, declaring total income and book profit under Section 115JB of the Income Tax Act. The assessment was completed, determining the total income and tax calculated on the book profit. The Principal Commissioner of Income Tax issued a notice under Section 263, pointing out an error related to the diminution in the value of investment in a subsidiary. The assessee company had debited an amount for this diminution, which was not added back while computing income under MAT provisions. The Principal Commissioner alleged an error in the assessment order for not adding this deduction, leading to the initiation of proceedings under Section 263.Notice under Section 263:The petitioner responded to the notice by explaining the error in the assessment order, and after considering the reply and a personal hearing, the Principal Commissioner passed an order dropping the proceedings initiated under Section 263 for Assessment Year 2012-2013. The Principal Commissioner directed that the objection raised was not accepted, indicating a discrepancy in the assessment process.Reopening of Assessment under Section 148:Subsequently, the petitioner received a notice under Section 148, stating that income for Assessment Year 2012-2013 had escaped assessment. The reasons provided included the fair value of land/development rights and the diminution in the value of investment in a subsidiary. Despite the earlier order dropping proceedings under Section 263, the Principal Commissioner approved the reopening of the assessment. The petitioner challenged this decision, arguing that there was a total non-application of mind by the Principal Commissioner, as the same issue was previously addressed and dropped by him.The Court, considering the duty of the Commissioner to apply his mind before granting approval for reopening assessments, found that the Principal Commissioner had not adequately reviewed the reasons for reopening. The Court allowed the petition, quashing the notice seeking to reopen the assessment for Assessment Year 2012-2013, based on the failure to satisfy the duty required for granting approval under Section 151 of the Income Tax Act.