Court quashes Income Tax Act notice & order, deeming reopening impermissible. Petitioner to pay specified amount.

The court quashed the notice under Section 148 of the Income Tax Act, 1961, and the corresponding order, as the reopening was deemed impermissible due to being based on a change of opinion and audit objections. The petitioner was directed to pay a specified amount without it being construed as an admission of liability or triggering penalty proceedings. The court disposed of the petition without any order as to costs.

---

---

Issues Involved:
1. Validity of the notice under Section 148 of the Income Tax Act, 1961.
2. Reopening of assessment beyond four years.
3. Alleged failure to disclose material facts fully and truly.
4. Specific heads under which income was alleged to have escaped assessment.
5. Change of opinion by the Jurisdictional Assessment Officer (JAO).
6. Audit objections as the basis for reopening assessment.
7. Deduction of statutory liabilities.

Detailed Analysis:

1. Validity of the notice under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 28th March 2019 issued under Section 148 of the Income Tax Act, 1961, for the assessment year 2012-2013, alleging that income had escaped assessment. The court concluded that the notice, along with the order dated 13th November 2019 rejecting the petitioner’s objections, should be quashed and set aside.

2. Reopening of assessment beyond four years:
The notice was issued after the expiry of four years from the end of the relevant assessment year, and an assessment under Section 143(3) had been completed. Therefore, the proviso to Section 147 applied, requiring the respondents to show that there was a failure on the part of the petitioner to disclose material facts fully and truly.

3. Alleged failure to disclose material facts fully and truly:
The court found that the respondents failed to discharge their onus to show that the petitioner did not disclose all material facts. The reasons recorded for reopening the assessment indicated full disclosure by the petitioner.

4. Specific heads under which income was alleged to have escaped assessment:
- Item (1): The JAO alleged that Rs. 29,30,000/- debited towards security deposit was not allowable under Section 37. The petitioner clarified that this amount was interest paid on security deposits and not security deposits themselves. The court agreed with the petitioner’s explanation.
- Item (2): The JAO claimed that Rs. 22,08,18,000/- towards rationalization initiative was capital expenditure, of which only Rs. 15,42,60,000/- was added back. The court found this to be a change of opinion.
- Item (3): The JAO noted that Rs. 2,15,19,017/- towards sales tax paid should not be reduced in the computation of income. The court found this view erroneous and based on audit objections.
- Item (4): The JAO stated that the petitioner claimed a deduction of Rs. 64,48,000/- on account of export incentives receivable, which should have been disallowed. The court found this to be a change of opinion.

5. Change of opinion by the Jurisdictional Assessment Officer (JAO):
The court held that reopening the assessment based on a change of opinion is not permissible. Items (2) and (4) were found to be based on a change of opinion.

6. Audit objections as the basis for reopening assessment:
The court noted that audit objections cannot be the sole basis for reopening an assessment. The JAO must independently evaluate the law and facts. The court cited the Indian and Eastern Newspaper Society case to support this view.

7. Deduction of statutory liabilities:
The court referenced the Kedarnath Jute Mfg. Co. Ltd. case, stating that statutory liabilities arise in the year the taxable event occurs, even if disputed. Therefore, the sales tax payments should be deductible in the year of payment.

Conclusion:
The court quashed the notice under Section 148 and the corresponding order, holding that the reopening was based on a change of opinion and audit objections, which is not permissible. The petitioner was directed to pay Rs. 30,54,398/- as per the revenue audit objections, without it being considered an admission of liability or leading to penalty proceedings. The petition was disposed of with no order as to costs.

---