INDIAN ENERGY EXCHANGE LIMITED vs. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 8(3) AND 2 ORS.
What did the High Court hold?
The High Court held that the notice dated March 24, 2015, issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for AY 2009-10 was invalid. The Court agreed with the observations made in its earlier order dated April 20, 2016. It found that the Assessing Officer had all the necessary information regarding the software development and maintenance expenses during the original assessment proceedings, which concluded with an order under Section 143(3). Therefore, there was no failure on the part of the petitioner to disclose material facts. Furthermore, the reasons for reopening appeared to be based on a change of opinion, as the very issue was considered during the regular assessment. Consequently, the Rule granted was made absolute, quashing and setting aside the impugned notice and the order rejecting the petitioner's objections.
What were the facts?
The petitioner, Indian Energy Exchange Limited, filed a writ petition challenging a notice dated March 24, 2015, issued under Section 148 of the Income Tax Act, 1961, to reopen the assessment for Assessment Year 2009-10. The notice was issued beyond four years from the end of the assessment year. The reasons for reopening cited a failure to disclose truly and fully material facts, specifically regarding software development and maintenance expenses of Rs. 8.75 crores, which the revenue considered capital expenditure. However, these details were provided to the Assessing Officer during the regular assessment proceedings, which concluded with an order dated November 30, 2011, under Section 143(3). The High Court initially granted a stay on the impugned notice.
What were the issues?
1. Whether the notice dated March 24, 2015, issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for AY 2009-10 is valid, considering it was issued beyond four years from the end of the relevant assessment year and whether there was a failure to disclose truly and fully all material facts necessary for the assessment. Assessee's Contention: The assessee argued that the notice was issued beyond the four-year period and that all material facts regarding the software development and maintenance expenses were disclosed during the regular assessment. The reasons for reopening appeared to be a change of opinion by the Assessing Officer, as the same issue was considered during the original assessment under Section 143(3). Revenue's Contention: The revenue contended that there was a failure on the part of the assessee to disclose truly and fully all material facts necessary for the assessment, leading to the belief that income chargeable to tax had escaped assessment.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
ORAL JUDGMENT : (Per K. R. Shriram, J.)
On 20th April 2016, the following order came to be passed while admitting the petition :
“1. Heard. Rule.
This petition under Article 226 of the Constitution of India challenges the notice dated 24th March, 2015 issued under Section 148 of the Income Tax Act, 1961 (the Act). The impugned notice seeks to reopen the Gitalaxmi CNR No : HCBM020066322016 Uploaded on - 19/03/2024 Downloaded on - 31/10/2026 00:46:03
2024:BHC-OS:4651-DB
2/3 210-oswp-1214-2016-J.doc assessment for Assessment Year 2009-10. 3. The impugned notice is beyond the period of 4 years from the end of the relevant assessment year. The reasons in support of the impugned notice refer to the profit and loss account which was subject matter for consideration during the course of regular assessment leading to an order dated 30th November, 2011 under Section 143(3) of the Act. Prima facie, though there is an averment in the reasons recorded that there has been failure to disclose truly and fully all material facts necessary for the assessment. No particulars in respect of the failure is spelt out in the reasons recorded in support of the notice.
The reasons proceed on the basis that the amount deducted as software development and maintenance expenses as revenue expenditure is in fact not deductible as it is a capital expenditure. However, we find that during the course of the assessment proceedings, the Assessing Officer had called upon the petitioner to give specific details in respect of the expenses debited in the profit and loss account. The petitioner furnished the details of the software development and maintenance expenses of Rs. 8.75 crores incurred along with a copy of the service agreement under which these expenses were incurred. The Assessing Officer thus had all the information available with him while passing the order of assessment dated 30th November, 2011 under Section 143(3) of the Act.
In the above view, prima facie, there has been no failure on the part of the petitioner to truly and fully disclose all the material facts necessary for the assessment. Besides, prima facie the reasons recorded in support of the impugned order appear to be on account of change of opinion as the very issue was a subject matter for consideration while passing the order dated 30th November, 2011 under Section 143(3) of the Act in regular assessment proceedings.
In the above view, there shall be a stay of the impugned notice dated 24th March, 2015. 7. It is made clear that the earlier order dated 16th April 2016 directing the petitioner to remove the office objections would continue to operate. In the absence of Gitalaxmi Uploaded on - 19/03/2024 Downloaded on - 31/10/2026 00:46:03
3/3 210-oswp-1214-2016-J.doc the petitioner removing the objections within 4 weeks from 16th April, 2016, the order passed in this petition is liable to be vacated and the petition will stand dismissed without further reference to the Court.”
We have considered the pleadings with assistance of the Counsels. We agree with the observations made by the Court in its order dated 20th April 2016. 3. In the circumstances, Rule granted on 20th April 2016, is made absolute in terms of prayer clause (a), which reads as under : “(a) that this Hon'ble Court be pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India calling for the records of the Petitioner's case and after examining the legality and validity thereof quash and set aside the impugned notice u/s. 148 of the Act dated 24thMarch 2015 (Ex. ‘E’) and the order dated 29th January, 2016 rejecting the objections of the Petitioner (Ex. ‘H’).”
Petition disposed. No order as to costs. (DR. NEELA GOKHALE, J.) (K. R. SHRIRAM, J.) Gitalaxmi GITALAXMI KRISHNA KOTAWADEKAR KRISHNA KOTAWADEKAR Date: 2024.03.19 11:08:32 +0545 Uploaded on - 19/03/2024 Downloaded on - 31/10/2026 00:46:03 Powered by TCPDF (www.tcpdf.org)
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