Sainath Trading Company Pvt. Ltd. vs Assistant Commissioner of Income Tax

This Petition under Article 226 of the Constitution of India challenges a notice dated 14th October, 2014 issued under Section 148 of the Income Tax Act, 1961("Act"). The impugned notice dated 14th October, 2014 seeks to re-open assessment for assessment year 2010-2011.

The Petitioner had filed its return of income for the assessment year 2010-2011 declaring total income of Rs.75.39/- lakhs. The Assessing Officer completed the assessment under Section 143(3) of the Act determining the Petitioner''s income at Rs.79.49 lakhs.

Thereafter, on 14th October, 2014, the Assessing Officer issued the impugned notice and reasons recorded by the Petitioner in support of the impugned notice read as under:-

"Reasons for re-opening the assessment u/s.147 of the I.T. Act, 1961:-

The assessee company has filed its return of income on 24.09.2014 declaring total income of Rs.75,39,550/- for A. Y. 2010-11. The case was assessed U/s.143(3) on 26.10.2012 at assessed income of Rs.79,49,330/-.

On verification of the records, it is seen following discrepancies are found as under:

House Property Income: The assessee company has offered only two properties rent while computing amounting to Rs.48,00,000/- However, it is seen from assessee''s submission dated 15.10.2012, the rent received is Rs.1,00,29,000/-. As per TDS claimed by the assessee, the rent was received of Rs.82,02,271/-. Further, as per rent agreement submitted by the assessee that total rent was received of Rs.96,00,000/-. After analyzing of above receipt, the assessee company has received total rent of Rs.124,90,800/-.

In view of the above, it is found that the assessee company has offered house property income of Rs.33,60,000/- instead of Rs.87,43,671/-(124,90,800/- minus 30% of 124,90,800/- as repairs works out of Rs.37,47,240/-). Therefore, the difference of Rs.53,83,560/- is the escaped income and the same is under assessed.

House property income in respect of investment and Stock in trade:

It is seen that the assessee company has made fresh investment in house property at various places of Rs.9,33,10,000/-. In view of Delhi High Court''s decision in the case of CIT Vs. Ansal Housing Finance and Leasing Co. Ltd. , 213 ITR 143 (Delhi High Court) the ALV @ 8.5% of the investment of the said properties works out to Rs.55,51,945/- which is the escaped income and the same is under assessed.

3 U/s.14A with Rule 8D:

It is notice that the assessee has itself made disallowance u/s 14A r.w.r.8D of Rs.32,61,864/- however in the assessment it was made only to Rs.4,09,780/- therefore it is under assessed by Rs.19,13,541/-.

4 Book Profit U/s 115JB of the I.T. Act,1961

It is seen that while computing the Book Profit U/s 115JB of the I.T. Act, 1961 the disallowance u/s 14A computed by the assessee of Rs.9,38,543/- has not been added to the Book Profit. However, considering the details filed by the assessee, the disallowance u/s 14A of Rs.32,61,864/- requires to be added to the Book Profit and interest u/s 234B of the I.T. Act, calculated accordingly.

In view of the above, I have reason to believe that the income has escaped assessment within the meaning of section 147 of the I.T. Act, 1961."

The Petitioner, by its letter dated 27th January, 2015 filed its objection to the reopening notice contesting the merits of the Assessing Officer having formed a reasonable belief that income chargeable to tax has escaped assessment on the issues of house property income, expenditure to be disallowed under Section 14A of the Act and determining book profits under Section 115JB of the Act. By an order dated 7th October, 2015 the Assessing Officer rejected the objections by inter alia holding that the objections do not warrant withdrawal of the impugned notice. This is particularly so as the merits of the claim would be examined in detail during the reassessment proceedings.

Mr. Tiwari, learned counsel appearing for the Petitioner submits that the reasons for reopening itself indicate that the basis for its issue is the record of the assessee available with the Assessing Officer. Thus, there is no fresh tangible evidence for the Assessing Officer to issue this notice. In the above view, it is submitted by him that the notice is without jurisdiction and ought to be quashed.

It is settled position in law that where the reopening notice has been issued within four years from the end of the relevant assessment year and the reasons indicate a reasonable belief that income chargeable to tax has escaped assessment, then mere disclosure of all facts material to the assessment will not insulate the assessee from a reopening notice. It is only in cases where the reasons recorded in support of the impugned reopening notice were a subject matter of consideration in the regular assessment proceeding then although the Assessing Officer may have reasons to believe, he cannot issue a reopening notice as it would be a change of opinion. This is not permitted. As held by the Supreme Court in CIT v/s Kelvinator of India Ltd. reported in , 320 ITR 561 that the power of the Assessing Officer is only to reassess and not to review an assessment order.

In the above view, if no opinion has been formed or the Assessing Officer has not applied his mind to the issues raised in the reopening notice during the regular assessment proceeding, the reopening notice within four years of the relevant assessment year cannot be held to be without jurisdiction. In the present case, we find that there is nothing on record to indicate that the two of three issues which have been raised in reasons recorded in support of the reopening notice have been considered by the Assessing Officer in regular assessment proceedings. The only issue which was a subject of consideration was with regard to disallowance of expenditure under Section 14A of the Act by the Assessing Officer in regular assessment proceedings. Nevertheless, the other two issues, namely, property income and book profits under Section 115JB of the Act were not subject to any consideration during the regular assessment proceedings. Nothing has been shown to us which indicates that the above two issues were subject matter of consideration during the regular assessment proceeding. In fact, the very submission made by Mr. Tiwari on behalf of the Petitioner to the effect that reopening notice in the absence of fresh material is without jurisdiction was rejected by this Court in Export Credit Guarantee Corporation of India Ltd. v/s Additional Commissioner of Income Tax and Others reported in , 350 ITR P.651.In fact the Court has inter alia observed as under:-

"To hold that the Assessing Officer must be deemed to have accepted what he has plainly overlooked or ignored in the assessment order would be to stretch the interpretation of section 147 to a point where the provision would cease to have meaning and content. Such an exercise of excision by judicial interpretation is impermissible. When an assessment is sought to be reopened within a period of four years of the end of the relevant assessment year, the test to be applied is whether there is tangible material to do so. What is tangible is something which is not illusory, hypothetical or a matter of conjecture. Something which is tangible need not be something which is new. An Assessing Officer who has plainly ignored relevant material in arriving at an assessment acts contrary to law. If there is an escapement of income in consequence, the jurisdictional requirement of section 147 would be fulfilled on the formation of a reason to believe that income has escaped assessment. The reopening of the assessment within a period of four years is in these circumstances within jurisdiction."

(Emphasis supplied)

In the above view, we see no reason to entertain the present Petition. The impugned reopening notice dated 14th October, 2014 cannot be said to be without jurisdiction.

Accordingly, the Petition is dismissed. No order as to costs.