2023 (4) TMI 1116 - HC - Income Tax

Reopening of assessment u/s 147 - validity of notice issued u/s 148A(b) - principal allegation against the petitioner is that the Work Contract Tax (WCT) as compared to the previous Financial Years (FYs) has increased substantially and that no payment has been made by the petitioner. HELD THAT - As petitioner categorically took the position that the statutory liability for the AY in issue i.e. AY 2016-17 had been paid in the subsequent year. It was also asserted that the petitioner had not claimed as expenditure the taxes which were payable and had remained unpaid in the period in issue i.e. AY 2016-17. For this purpose the relevant documents including the balance sheet for AY 2016-17 as on 31.03.2016 were furnished to the AO. Besides this we are told that challans concerning liquidation of the aforementioned statutory liability were also furnished. In sum it was the petitioner s stand that statutory dues concerning withholding tax service tax and outstanding labour cess in no circumstances would constitute income chargeable to tax which had escaped assessment. We may note that these are aspects which have not been dealt with by the AO while passing the order u/s 148A(d) of the Act - observations made by the AO missed the crucial fact which is the petitioner s stand that it never claimed deductions concerning unpaid taxes adverted to hereinabove. The impugned order passed under Section 148A(d) of the Act is set aside - AO will carry out a de novo exercise.

Summary

Issues involved:
The judgment deals with the assessment of income tax liability based on Work Contract Tax (WCT) for the financial year 2015-16 (Assessment Year 2016-17). The main issue is whether the increased statutory liability of the petitioner, which had not been paid, constituted income chargeable to tax that had escaped assessment.

Details of the Judgment:

1. Assessment of Increased Statutory Liability:
The Assessing Officer (AO) alleged that the petitioner's statutory liability for FY 2015-16 had substantially increased compared to the previous year, resulting in unliquidated income chargeable to tax amounting to Rs. 7,35,38,380. The petitioner contended that the statutory liability had been paid in the subsequent year and had not claimed unpaid taxes as expenditure for the relevant period.

2. Petitioner's Response and Documents Submitted:
The petitioner submitted a reply to the notice issued under Section 148A(b) of the Income Tax Act, 1961, stating that the statutory liability for the Assessment Year 2016-17 had been paid in the subsequent year. The petitioner furnished relevant documents, including the balance sheet for AY 2016-17 and challans showing the liquidation of statutory liability.

3. AO's Order and Crucial Omission:
The AO's order dated 30.07.2022 did not address the petitioner's assertion that unpaid taxes were not claimed as expenditure. The AO considered the accumulating statutory liabilities as part of receipts if not paid by the due date, citing Section 43B of the Income Tax Act.

4. Judgment and Directions:
The High Court set aside the impugned order and directed the AO to conduct a fresh assessment. The AO was instructed to provide a personal hearing to the petitioner's representative and issue a notice specifying the date and time of the hearing. The writ petition was disposed of accordingly, emphasizing that the observations made would not affect the merits of the case.

5. Conclusion:
The judgment concluded by stating that the pending application was also disposed of, and the observations made in the judgment would not impact the substantive aspects of the case.