THE UGAR SUGAR WORKS LTD vs. THE ASSISTANT COMMISIONER OF INCOME TAX AND ORS

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WP/12914/2018HC BombayHCBM01050998201818 January 2019Author: HON'BLE SHRI JUSTICE M.S. SANKLECHA,HON'BLE SHRI JUSTICE AKIL KURESHI3 pages
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What did the High Court hold?

The High Court held that the impugned notice for reopening of assessment, issued beyond a period of four years from the end of the relevant Assessment Year, could not be sustained. The Court found that the first proviso to Section 147 of the Income Tax Act, 1961, which requires income to have escaped assessment due to the assessee's failure to disclose fully and truly all material facts, was not satisfied. The reasons recorded by the AO clearly established that the AO had identified an error within the assessment records and referred to similar additions in a subsequent assessment year, which were confirmed by the CIT(A). However, the AO did not refer to any material outside the assessment records to form the belief that income had escaped assessment. Therefore, the impugned notice was set aside. The petition was disposed of accordingly.

What were the facts?

The petitioner, The Ugar Sugar Works Ltd., is challenging a notice of reopening of assessment dated March 26, 2018, for Assessment Year 2011-12. The original assessment under Section 143(3) was completed on March 28, 2014. The Assessing Officer (AO) issued the reopening notice based on reasons recorded, which indicated a discrepancy between the profit before tax (Rs. 385.45 lakhs) and net profit (Rs. 401.57 lakhs) as per the financial statement for FY 2010-11 (relevant to AY 2011-12) and the assessed book profit of (-) Rs. 41,58,410/-. The AO also noted similar additions in AY 2012-13, where the assessee's appeal was dismissed. The petitioner submitted objections to the reopening notice, which were rejected by the AO on September 21, 2018, leading to the present writ petition.

What were the issues?

1. Whether the notice for reopening of assessment issued beyond a period of four years from the end of the relevant Assessment Year is valid, considering the first proviso to Section 147 of the Income Tax Act, 1961, which requires income to have escaped assessment due to the assessee's failure to disclose fully and truly all material facts? (Question of law) Assessee's contention: The assessee argued that the reopening notice was issued beyond four years and the AO had not established that income escaped assessment due to the assessee's failure to disclose material facts. The AO relied solely on the case records and did not refer to any material outside the assessment records. Revenue's contention: The judgment does not record any specific contentions made by the revenue.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 147,Section 115JB,Section 148,Section 151(1)

AI-generated summary — verify with the full judgment below

wp-12914-2018

IN THE HIGH COURT OF JUDICATURE AT BOMBAY APPELLATE SIDE CIVIL JURISDICTION WRIT PETITION NO.12914  OF 2018 The Ugar Sugar Works Ltd., .. Petitioner. v/s. The Asst. Commissioner of Income Tax Cricle­2, Sangli & Others .. Respondents. Mr.   Riyaz   Padvekar   with   Mr.   Tanzil   Padvekar   i/b.   Dave   &   Padvekar Associates, for the Petitioner. Mr. Sham Walve, for the Respondents. CORAM:  AKIL KURESHI & M.S.SANKLECHA, JJ. DATE    : 18th JANUARY, 2019. P.C:­ Petitioner   has   challenged   a   notice   of   re­opening   of   an Assessment dated 26th March, 2018, is annexure 'A' to the Petition.  This challenge, arising in the following back­ground:­ (a) Petitioner is a company registered under the Companies Act. For the Assessment Year 2011­12, Petitioner had filed return of income, which was taken in scrutiny by the Assessing Officer who passed an order of Assessing under Section 143(3) of the Act on 28th March, 2018; (b) To re­open such Assessment, Assessing Officer has issued impugned notice. In order to do so, he recorded following reasons:­ S.R.JOSHI

wp-12914-2018 “ On perusal of the case records for the A.Y. 2011­12, it is seen that as per financial statement of the assessee (72nd annual report of F.Y. 2010­11 relevant to A. Y. 2011­12) profit before tax of assessee is Rs.385.45 lakhs and net profit is Rs.401.57 lakhs.  However, in assessment order u/s. 143(3) of the I.T. Act dated 28.03.2014 for the A.Y. 2011­12, book profit has been assessed as (­) Rs.41,58,410/­, it is also seen that additions have been done on similar issue in A.Y. 2012­13 in which assessee's appeal has  been dismissed by Ld. CIT(A). I, therefore, have reason to believe that book profit of Rs.385.45 lakhs under the MAT provisions of the section 115JB of assessee in F. Y. 2010­11 has escaped assessment within the meaning of section 147. Based on the above reasons, I consider that this is a fit case for reopening of the assessment u/s. 147. Therefore, approval of the Pr. Commissioner of Income Tax­1, Kolhapur is sought in this case as per the provisions of Section 151(1), for issue of notice u/s. 148.” (c) Upon being supplied reasons, Petitioner received objections to the notice   for   the   re­opening   under   communication   dated   18th September, 2018. Such objections were rejected by the Assessing Officer by an order dated 21st September, 2018. Hence,this Petition. 2 Having heard the learned Counsel for the parties for final disposal of the Petition and having perused the documents on record, what emerges is that, the impugned notice has been issued beyond a period of four years from the end of the relevant Assessment Year. The requirement flowing  from the first proviso to Section 147 of the Act, that income chargeable to tax has escaped Assessment due to failure of the Assessee to disclose fully and truly all material facts, therefore, would have to be satisfied. In the present case, the reasons recorded by the Assessing Officer would clearly establish that, these requirement is not S.R.JOSHI

wp-12914-2018 satisfied. In the reasons itself, the Assessing Officer has referred to perusal of the case recorded for the Assessment Year in question from which, he could see that certain error in the assessment has crept in. He refers to the similar additions made in the assessment for the Assessment Year 2012­13 which were confirmed by the Commissioner of Income Tax (Appeals). 3 In the absence of the failure of the Assessee to disclose fully and truly all material facts, the impugned notice issued beyond a period of four years of the relevant Assessment Year, cannot be sustained. The Assessing   Officer   has   not   referred   to   any   material   outside   of   the Assessment records to form the belief that, income chargeable to tax has escaped assessment. In fact, he proceeds essentially  on the basis of the case records.  Under the circumstances, impugned notice is set aside. 4 Petition disposed of. (M.S.SANKLECHA,J.) (AKIL KURESHI,J.) S.R.JOSHI

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