TaxTMI 
TaxTMI 
2024 (8) TMI 1305
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....148 of the Income Tax Act, 1961 ("the Act") has been approved under Section 151 of the Act on the premise that income had escaped assessment owing to absence of full and true disclosures by the Petitioner at the time of the original assessment. Factual Background and Context: 3. The original assessment was made pursuant to an order dated 22nd December, 2017 ("Assessment Order") after scrutiny of the returns filed by the Petitioner. The Petitioner had originally declared a total income of Rs. 95.14 Crores. Pursuant to a notice for scrutiny under Section 143 (2) dated 29th July, 2016. Another notice dated 27th November, 2017 was issued under Section 142 (1), along with a questionnaire. Eventually, an Assessment Order was passed computing total income of Rs. 105.14 Crores, after disallowance of a deduction in the sum of Rs. 10 Crores. 4. Five years after the end of the Assessment Year, the Impugned Notice was issued. On the Petitioner seeking reasons underlying the Impugned Notice, reasons were communicated to the Petitioner vide letter dated 6th August, 2021. The relevant contents are extracted below:- 2. On perusal of records, it is seen that the assessee in its co....
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.... 4th September, 2021 the Petitioner raised objections to the reasons offered. The Petitioner argued that the reasons point out to a mere change in opinion and that no new tangible material has been brought to bear. The Petitioner submitted that there was nothing to show that material facts had not been fully and truly disclosed by the Petitioner during the original assessment. The Petitioner asserted that under Section 147, when reassessment is sought to be initiated after the expiry of four years from the end of the relevant assessment year, without a demonstration of such failure to disclose material facts, reassessment would not be permissible. 6. The Revenue, by an order dated 25th February, 2022 ("Impugned Order") rejected the objections. In a nutshell, the decision to conduct reassessment was stoutly defended. The Petitioner was told that all its objections could well be raised in the course of the reassessment proceedings. Consequently, this Writ Petition was filed seeking to quash the Impugned Notice, the Impugned Order, and a notice dated 11th November, 2021 under Section 143 (2) read with Section 147 of the Act, calling upon the Petitioner to participate in the reasses....
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.... response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further ***** Provided also ***** Explanation 1 to Explanation 4 ***** [Emphasis Supplied] 10. Even a plain reading of the foregoing would show that a vital precondition for invoking Section 147 of the Act after the expiry of four years from the end of the relevant assessment year, is that during the original assessment, the assessee ought to have failed to fully and truly disclose all material facts necessary for the assessment. It is evident from the face of the record that the reassessment was initiated in March 2021, which is five years after the end of the Assessment Year 2015-16. Contentions of the Parties: 11. Mr. Percy Pardiwala, learned Senior Counsel representing the Petitioner, pointed out that on the face of it, the Impugned Notice and the reasons in support of it, do not make out a case for the reassessment being valid. Since the reassessment is proposed after the four-year period referred to in Section 147, it was vital for the Revenue t....
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.... and D) Likewise, the Revenue has asserted that perusal of the Auditor's Report under Section 44AB of the Act would show that interest to the tune of Rs. 46,446/- ought to have been disallowed. The audit report indeed lists out in full detail, each and every element of interest that adds up to the aforesaid sum of Rs. 46,446/-, which means that there had been no failure to disclose the same. 13. Consequently, he would argue, the very jurisdictional fact necessary for initiating proceedings under Section 147 read with Section 148 i.e. failure to disclose material facts, was missing. In relation to none of the aforesaid facts, has the Revenue sought to introduce any new evidence it has unravelled or chanced upon. 14. Instead, Mr. Pardiwala would submit that the Revenue, having conducted an informed assessment in 2017, is now seeking to change its opinion on well-disclosed facts, and yet, purporting to invoke Section 147 of the Act. In the absence of a failure by the Petitioner to fully and truly disclose material facts, four years having passed since the end of the Assessment Year, the returns simply cannot be reassessed. Therefore, he submitted, the proposed reassessm....
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....er, 2017 had been provided. Personal hearings had also been held on 29th November, 2017 and 8th December, 2017. On each of the four counts for which reassessment is being proposed, the facts had indeed been disclosed, as is seen from the very reasons provided by the Revenue in support of initiating reassessment. 19. Therefore, it is evident that the Revenue is now seeking to express a different opinion based on the very same facts fully disclosed during the original assessment. The following analysis would make this clear:- A) The treatment of revenue expenditure given in the tax returns to the amount of Rs. 49.78 lakhs incurred towards improvement to leasehold property is writ large in the statement of computation of income and in the financial statements provided by the Petitioner to the Assessing Officer; B) The amortisation of investments to the tune of Rs. 23.63 crores, being taken to the profit and loss account is admittedly a facet now being commented upon by the Revenue from a "perusal of the profit and loss account". While this is the most sizable element in the proposed reassessment, the fact of treating this as revenue expenditure was clearly disclos....
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....the Principal Commissioner of Income-tax on the same day - all under Section 151 of the Act. Therefore, the reassessment has been contemplated and initiated one year after the expiry of four years from the end of the relevant assessment year (2015-16). Therefore, failure by the Petitioner to disclose material facts was a jurisdictional imperative, which was simply incapable of being discerned from the material on record. Therefore, we have no hesitation in holding that the Revenue's bid to initiate reassessment is unfounded and in direct conflict with Section 147 of the Act. Therefore, the sanction for reassessment under Section 151 could simply not have been given. 22. The requirement for sanction by a high-ranking official under Section 151, is an inherent check and balance in the statutory scheme of the Act. Such officers are expected to apply their mind to the facts and the applicable law and then accord sanction. In the instant case, the proposed reassessment was sanctioned by the Principal Commissioner of Income-tax, with the following remarks:- "Yes, I am satisfied with the reasons recorded by the A.O. for issuance of Notice u/s 148 of the I.T.Act, 1961." [Emp....
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....f four years expired on 1st March, 2001. The notice issued is dated 5th November, 2002 and received by the assessee on 7th November, 2002. Under these circumstances, the notice is clearly beyond the period of four years. 20. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The....