ITAT Extends Relief To Owners Of Taj Hotel Group, Sets Aside Reassessment Action Initiated Based On ED Report
The Mumbai Bench of the Income Tax Appellate Tribunal has granted relief to the Indian Hotels Company Ltd, which owns the Taj hotels chain and set aside an addition of ₹8,22,25,142/- made by the Assessing Officer to its declared income of ₹107,74,26,414/- for the AY 1998-99.The issue before the Tribunal was regarding the validity of reopening for AY 1998-99 beyond a period of 4...
The Mumbai Bench of the Income Tax Appellate Tribunal has granted relief to the Indian Hotels Company Ltd, which owns the Taj hotels chain and set aside an addition of ₹8,22,25,142/- made by the Assessing Officer to its declared income of ₹107,74,26,414/- for the AY 1998-99.
The issue before the Tribunal was regarding the validity of reopening for AY 1998-99 beyond a period of 4 years.
Assessee submitted that a scrutiny assessment was completed u/s 143(3) of the Income-tax Act, 1961 for the assessment year under consideration. That the assessment was reopened after the expiry of 4 years from the end of the relevant assessment year. Therefore, the Assessee argued that for a valid reopening, the Assessing Officer was required to categorically aver that the Assessee failed to fully and truly disclose all material facts necessary for its assessment. However, the Assessing Officer failed to do so in the notice issued for reopening.
Relying on Hindustan Lever Ltd. v. R.B. Badkar [268 ITR 332 (Bom)], the Assessee argued that the reopening is bad in law.
It also pointed out that the AO had relied on Clause (b) of Explanation 2 to Section 147 of the Act to form a belief that income has escaped assessment. However, the said provision pertains to a case where a scrutiny assessment had not been made, which was not the case here.
The Department submitted that the reassessment proceedings were initiated on the basis of the report received from the Enforcement Directorate.
ITAT held that the AO was categorically required to aver failure on the part of the Assessee to disclose fully and truly all material facts necessary for framing the assessment. Since the Assessing Officer failed to do so, the ITAT quashed the reopening proceedings.
The ITAT also quashed the reopening basis the incorrect invocation of Clause (b) of Explanation 2 to Section 147 of the Act since the original assessment had already been completed u/s 143(3) of the Act in the case of the Assessee.
Appearance: Senior Advocate V. Sridharan, assisted by Mr. Ravi Sawana along with Ms. Neha Sharma (Advocates) from Lakshmikumaran and Sridharan Attorneys for Assessee; Advocate Hemanshu Joshi for Respondent
Case title: The Indian Hotels Company Limited v. Additional Commissioner of Income Tax Range 2(2), Mumba
Case no.: ITA No.5653/MUM/2011
