2023 (9) TMI 842 - HC - Income Tax

Reopening of assessment - Reason to believe - recorded in the reasons to believe i.e. that ROI had not been filed by the petitioner - reasons to believe recorded by the AO have strangely also received the approval of the superior i.e. the Principal Commissioner of Income Tax (PCIT) - HELD THAT - As a matter of fact because the AO proceeded on a factually erroneous ground he also took recourse to CBDT Instruction No. 14/2013 dated 23.09.2013 which framed the Standard Operation Procedure (SOP) in the cases concerning non-filers i.e. those assesses who have not filed returns. Furthermore we find that in the ROI the petitioner has disclosed not only the investments made but also the amount earned as interest. The amount which the assessee has disclosed by way of Investment is Rs. 10, 74, 800/-. Likewise insofar as the interest is concerned the amount disclosed in the ROI is Rs. 1, 23, 857/-. The gross receipts noted in the ROI is the figure that is noted in the reasons to believe which is shown as Rs. 2, 93, 11, 115/-. Therefore the petitioner was entitled to contend that not only the contractual receipts were disclosed but also the investment in debentures/bonds amounting to Rs. 5 lakhs and the interest earned also formed part of its ROI. Thus the reasons to believe are the foundation on the basis of which the reassessment proceedings can be triggered against any assessee. Once the foundation is removed the entire edifice would axiomatically collapse. In this case, the foundation was completely absent. The AO s reason to reopen the assessment proceedings was founded on an erroneous fact which was that the petitioner had possibly not filed its ROI. The record has shown the contrary. Therefore the reassessment proceedings will crumble. WP allowed.

Summary

Issues:
The judgment concerns the assessment year 2011-12. The issues involved are the challenge against the notice dated 30.03.2018 issued under Section 148 of the Income Tax Act, 1961, and the order dated 30.11.2018 passed by the Assessing Officer (AO) in response to objections raised by the petitioner.

Assessment and Reopening of Assessment:
The petitioner filed its Return of Income (ROI) for the AY 2011-12 on 28.02.2012, declaring an income of Rs. 23,66,050/-. The return was processed under Section 143(1) of the Act, and an intimation was given to the petitioner on 20.03.2012. Subsequently, the petitioner electronically filed its ROI in response to the notice issued under Section 148 of the Act. The petitioner's declared total income in the return filed in response to the notice was Rs. 23,66,047/-. The AO issued a notice for reopening the assessment based on certain reasons, including earnings from contracts, investments in bonds/debentures, and interest on refund under Section 244A of the Act. However, the trigger for reopening the assessment was the alleged failure of the petitioner to file a return, which was factually unfounded as the ROI was filed back in 2012 and processed under Section 143(1) of the Act.

Reasons for Reopening and Defense:
The AO's reasons for reopening the assessment included the alleged non-filing of the return by the petitioner, leading to the purported failure to disclose all material facts necessary for assessment. The AO's reasons also received approval from the Principal Commissioner of Income Tax (PCIT). The respondent's position was defended by stating that the assertion of non-filing of the ROI was an inadvertent error. However, the defense was not accepted as the reasons to believe proceeded on the premise that certain aspects needed examination due to the non-filing of the return, which was factually incorrect.

Disclosure in ROI and Conclusion:
The petitioner had disclosed the investments made in debentures/bonds and the interest earned in the ROI. The disclosed investment amount was Rs. 10,74,800/-, and the interest amount was Rs. 1,23,857/-. The gross receipts noted in the ROI matched the figure mentioned in the reasons to believe. The petitioner contended that all relevant financial details were disclosed in the ROI, including the contractual receipts, investments, and interest earned. The Court found that the foundation for reopening the assessment was erroneous as the petitioner had indeed filed the ROI, leading to the quashing of the notice and objections.

Decision and Disposition:
The Court allowed the prayer in the writ petition, quashing the impugned notice dated 30.03.2018 and objections dated 30.11.2018. The writ petition was disposed of in favor of the petitioner, highlighting the importance of accurate reasons for reopening assessment proceedings as the foundation for such actions.