MEGHMANI ORGANICS LTD., vs. ASSISTANT COMMISSIONER OF INCOME TAX

Petitioner is a company registered under the Companies Act. It is assessed to tax regularly under the Income Tax Act. By way of present petition, the petitioner seeks to challenge notice dated 23.3.2011 issued by the Assistant Commissioner of Income Tax, seeking to reopen the assessment for the year 2004-

The petition arises in the following factual background.

For the assessment year 2004-05, originally assessment was framed after scrutiny. After one round of remand by the Tribunal, final assessment came to be framed on 30th April 2010, determining total income of the assessee at Rs.15,56,86,104/-.

The Assessing Officer issued notice for reopening the assessment on 23rd March 2011, stating that he had reason to believe that income of the assessee chargeable to tax had escaped assessment. He gave 30 days time to the assessee to file return in response to such notice.

At the request of the petitioner, the Assessing Officer supplied reasons recorded by him for reopening such assessment which reads as under: “In this case, the assessee had filed its return income for A.Y.2004-05 on 28.10.2004 and notice u/s.143(2) of the Act was issued on 26.07.2005. However, before completion of the assessment

The petitioner raised objection to the re- assessment proposed by the Assessing Officer vide its communication dated 23rd August 2011. Such objections were, however, disposed of by the Assessing Officer by order dated 19.9.2011. At that stage, the petitioner approached this Court challenging the validity of the reopening of the assessment.

Learned counsel for the petitioner took us through the reasons for reopening of the assessment and submitted that the assessment previously framed after scrutiny could not have been reopened beyond four years from the end of relevant assessment year. It was contended that there was no failure on the part of the assessee to disclose truly and fully all material facts. Our attention was also drawn to the correspondence entered into between the Assessing Officer and the petitioner during the original assessment proceedings to contend that all aspects were examined by the Assessing Officer threadbare. In the final order of the assessment, no additions on the grounds that Customs Duty allegedly paid on behalf of the customers or the ceasing of liability

On the other hand, counsel for the Revenue relying on the reasons stated in the affidavit in reply filed by the respondent in this petition contended that notice was validly issued and the assessment proceedings should be allowed to be proceeded.

Having thus heard the learned counsel for the parties and having perused the documents on record, we recall that the Assessing Officer in his reasons recorded has indicated two grounds on which he formed an opinion that income chargeable to tax in case of the assessee had escaped assessment. First ground according to the Assessing Officer was that the assessee had wrongly claimed customs duty which was paid by the assessee on behalf of the customers. Second ground was that according to the Assessing Officer, the assessee had shown outstanding sales commission liability of Rs.3,51,00,000/- (rounded off). Such commission payments pertained to the earlier years and were old. According to the Assessing Officer, since more than three years had passed, such liability should be treated to have ceased. Thus the issue was not considered by the Assessing Officer in the original assessment.

On 17th December 2007, while original assessment proceedings were going on, the assessee in response to certain queries raised by the Assessing Officer had given an explanation, relevant portion of SCA/17010/2011 6/7 which reads as under: