2024 (9) TMI 969 - HC - Income Tax

Reopening assessment under Section 147 invalid when no additional tax due beyond Section 115JB payment

Adani Wilmar Limited Versus The Assistant Commissioner Of Income Tax, Circle 1 (1) (1), Ahmedabad

Gujarat HC held that reopening of assessment u/s 147 was invalid where petitioner had already paid tax u/s 115JB at 7.5%. The court found that adding the ... Reopening of assessment u/s 147 - acceptance of income u/s 115JB - information on insight portal, a search action u/s 132 of the Act was conducted at the premises of accomodation entry provider - HELD THAT:- It is apparent that the petitioner was assessed under the provisions of Section 115JB of the Act and has paid tax at the rate of 7.5% under the said section. Adding the amount calculated by the AO towards the escaped income to the amounted computed under the ordinary provisions of the Act, the aggregate amount would be less than the amount of tax paid by the petitioner on being assessed under Section 115JB of the Act. Therefore, when the tax payable, as per the reasons recorded, is less than the amount paid by the petitioner under the assessment framed u/s 143 (3) of the Act, the question of any income having assessed would not arise. Therefore, the reasons recorded itself would indicate that in fact no income has escaped assessment to form such belief. Basic precondition for reopening of the assessment under Section 147 of the Act that the AO should have “reason to believe” that income has escaped assessment is not satisfied. Assessing Officer, therefore, could not have assumed the jurisdiction to issue impugned notices u/s148 of the Act and the impugned notices and the proceedings pursuant thereto cannot be sustained. Decided in favour of assessee. Issues:Challenge to notices issued under Section 148 of the Income Tax Act, 1961 for reopening completed assessments for Assessment Years 2014-15, 2015-16, and 2016-17.Analysis:The petitioner, a company, challenged notices seeking to reopen completed assessments for the mentioned years. The petitioner filed returns declaring income and paid tax on book profit under MAT provisions. Assessment orders were passed under Section 143(3) of the Act. An appeal for the Assessment Year 2016-17 was partly allowed. The respondent sought to reopen assessments based on information from a search at Mr. Hitesh Jain's premises, alleging accommodation entries to beneficiaries, including the petitioner. The petitioner objected, but objections were rejected. The petitioner contended that reopening lacked 'reason to believe' and would not affect tax liability under Section 115JB.The respondent argued that the petitions were premature as only notices were issued, with appeal options available. Information from the search revealed transactions with Mr. Hitesh Jain, justifying reopening under Section 148. The respondent cited Explanation 3 of Section 147 to justify reopening despite Section 115JB acceptance. Compliance with notice requirements and proper application of mind were asserted. However, the court found that the petitioner's tax paid under Section 115JB exceeded the aggregate amount post-reopening, indicating no income escape. The court concluded that the Assessing Officer lacked 'reason to believe' income escapement, rendering the notices unsustainable.In the judgment, the court allowed the petitions, quashing the notices and subsequent proceedings. The court held that the Assessing Officer lacked jurisdiction to issue the notices under Section 148, as the reasons recorded did not support income escapement belief. The impugned notices dated 30th and 31st March 2021 were thus set aside, with the rule made absolute and no costs awarded.