2022 (3) TMI 905 - HC - Income Tax

Court rules in favor of petitioner challenging Income Tax Act notice, highlighting errors and quashing order

The court ruled in favor of the petitioner in a case challenging a notice under section 148 of the Income Tax Act for the assessment year 2016-17. The ... Reopening of assessment u/s 147 - excess weighted deduction under section 35(2AB) - HELD THAT:- In computation of income in assessment order, Disallowance after excess weighted deduction under section 35(2AB) has been added to the income of the petitioner. Therefore, the JAO has grossly erred in alleging in the reasons recorded for reopening that petitioner had claimed deduction of disallowed amount by DSIR and that there has been failure to disclose fully and truly all the material facts. Hence, the said amount of weighted deduction is required to be added to the income and that has escaped assessment. As noted earlier in the assessment order this amount is already added to the income. When these facts were brought to the notice of JAO in the objection dated 26.11.2021 fled through petitioner’s Chartered Accountant in the order dated 24.01.2022 impugned in this petition, disposing petitioner’s objection JAO has conveniently chosen not to deal with the submissions of petitioner on merits. - Decided in favour of assessee. Issues:1. Challenge to notice under section 148 of the Income Tax Act for the assessment year 2016-17.2. Rejection of objections to reopening by the petitioner.3. Claim of deduction under section 35(2AB) of the Act.4. Failure to disclose fully and truly all material facts in the original Return of Income.5. Allegations of inaccurate particulars of income and penalty proceedings under section 271(a)(c) of the Act.Analysis:1. The petitioner contested a notice dated 30.03.2021 issued under section 148 of the Income Tax Act for the assessment year 2016-17. The petitioner challenged this notice along with the order dated 24.01.2022 that rejected the objections to reopening. The petitioner argued that the Jurisdictional Assessing Officer (JAO) incorrectly claimed that the petitioner failed to disclose all material facts in the original Return of Income.2. The reasons for reopening centered around the petitioner's claim of deduction under section 35(2AB) of the Act. The JAO contended that the DSIR had disallowed a portion of the claimed amount, which the petitioner did not disclose in the original return. However, a review of the assessment order for the subsequent year revealed discrepancies in the JAO's reasoning for reopening, indicating a gross error in the initial assessment.3. The assessment order highlighted that the DSIR had approved only a portion of the claimed R&D expenses for deduction under section 35(2AB) of the Act. The petitioner, upon receiving the DSIR order, acknowledged the disallowed amount and voluntarily offered to claim it under a different section of the Act. Despite this, the JAO disallowed the excess deduction, initiated penalty proceedings, and added the disallowed amount back to the petitioner's income.4. The assessment order further detailed the disallowance of the excess weighted deduction claimed by the petitioner, stating that the conditions under section 35(2AB) were not met. The JAO added the disallowed amount to the total income and initiated penalty proceedings for inaccurate particulars of income. However, the petitioner argued that the disallowed amount had already been added to the income in the assessment order, rendering the reopening unnecessary.5. In light of the discrepancies and errors in the JAO's reasoning for reopening, the court found in favor of the petitioner. The court allowed the petition, quashing the notice dated 30 March 2021 and the subsequent order dated 24 January 2022. The court disposed of the petition with no order as to costs, providing relief to the petitioner in this matter.