Reopening assessment under sections 147/148 invalid where CSR mandated by Companies Act; no escaped income or offense

HC held that reopening assessment under sections 147/148 was invalid. Explanation 1 did not apply because CSR expenditure was mandated by the Companies Act and its proposed disallowance did not constitute an offense; there was no tangible material showing escaped income. Relying on SC precedents, the court rejected retrospective application that would alter the prior law or create a failure to disclose. The assessing officer exceeded jurisdiction in reopening, and the taxpayer's challenge succeeded.

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Issues involved:
The judgment addresses the challenge to a notice under section 148 of the Income-tax Act, 1961 for reopening the assessment for the Assessment Year (AY) 2013-14 and the subsequent order rejecting objections raised by the Petitioner to the notice.

Details of the Judgment:

Issue 1: Reopening of Assessment
The Petitioner, a company engaged in electricity generation, filed its original and revised income tax returns for A.Y. 2013-14. The Respondent made disallowances in the assessment order, leading to objections by the Petitioner. Subsequently, the Respondent issued a notice under section 148 to reopen the assessment, which was protested by the Petitioner. The Respondent's decision to reopen the assessment was challenged by the Petitioner, arguing that all material facts were disclosed in the original assessment and the reopening was not based on tangible material or income escapement.

Issue 2: Objections Rejection
The Respondent passed an order rejecting the objections raised by the Petitioner and issued a show cause notice for completion of assessment. The Petitioner, seeking to halt the proceedings, filed a petition challenging the notice and order issued by the Respondent.

Issue 3: Legal Considerations
The Court examined the legality of the Respondent's actions under sections 147 and 148 of the Act. It was established that unless income has escaped assessment due to the assessee's failure to disclose all material facts, the Assessing Officer lacks jurisdiction for reassessment. The judgment referenced previous cases to emphasize the importance of fully and truly disclosing primary facts for assessment purposes.

Issue 4: Conclusion
The Court found that the reasons for reopening the assessment were based on audited accounts and did not justify the reopening beyond four years. The Court highlighted that the disallowance of CSR expenditure based on a provision inserted subsequently was not sustainable. It was concluded that the Assessing Officer exceeded the jurisdiction in reopening the assessment, leading to the quashing of the notice and order issued by the Respondent.

Final Order:
The Court quashed and set aside the impugned notice and order for A.Y. 2013-14, prohibiting the Respondents from taking further steps. The rule was made absolute in favor of the Petitioner.

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