Audit Objection Can't Be The Basis Of AO's 'Reasons To Believe ' That Too After Lapse Of 6 Years: Madras High Court
The Madras High Court has quashed the reassessment proceedings and held that an audit objection does not satisfy the requirement of the Assessing Officer having an independent "reason to believe" that income has escaped assessment, that too after the elapse of nearly six years. The single bench of Justice Anitha Sumanth has observed that all materials with regard to the computation...
The Madras High Court has quashed the reassessment proceedings and held that an audit objection does not satisfy the requirement of the Assessing Officer having an independent "reason to believe" that income has escaped assessment, that too after the elapse of nearly six years.
The single bench of Justice Anitha Sumanth has observed that all materials with regard to the computation of tax under the provisions of MAT were available before the Assessing Authority during the original assessment proceedings.
The petitioner/assessee is a company assessed to income tax on the file of the sole respondent in terms of the provisions of the Income Tax Act, 1961. In respect of AY 2012-13, a return of income has been filed, disclosing income both under the regular provisions as well as under the provisions of Minimum Alternate Tax (MAT).
The Assessing Authority has neither mechanically adopted the figures supplied by the petitioner nor the methodology for computation of book profit as he adds expenses attributable to exempt income, increasing the taxable book profit for the purposes of Section 115JB. The order of assessment passed under scrutiny is a reasoned order passed after the application of mind upon the computation furnished by the petitioner.
The notice under Section 148 was issued on 21.03.2019, barely 10 days prior to the expiry of the six-year period, which places an absolute bar upon reassessment, except in certain stipulated situations.
The premise upon which the assessment has been re-opened was that the loss available was a sum of Rs. 50.52 crores and no book loss or depreciation was available to be deducted under Section 115 JB. However, the computation accompanying the revised return reveals a depreciation of a sum of Rs. 18.05 crores.
The assessee has challenged the assumption of jurisdiction by the assessing officer. Section 147 imposes a precondition that, for the department to proceed for reassessment beyond a period of 4 years, the burden is upon it to establish that the assessee made an incomplete and untrue disclosure in the first instance. In the present proceedings, the reopening is beyond the period of four years from the end of the relevant assessment year.
The court held that there was no allegation in the reason itself to the effect that there had been any incomplete disclosure or false statement made at the time of assessment that would justify the assumption of jurisdiction beyond the period of four years.
Case Title: M/s.EIH Associated Hotels Ltd. Versus The Assistant Commissioner of Income Tax
Case No: W.P.No.25229 of 2019 and W.M.P.Nos.8537 of 2020 and 24799 & 24802 of 2019
Citation: 2022 LiveLaw (Mad) 385
Date: 19.07.2022
Counsel For Petitioner: Senior Counsel R.V.Easwar
Counsel For Respondent: Junior Standing Counsel Prabhu Mukund Arun Kumar