Income Reassessment Within Time-Limit Cannot Be Interfered If Income Escapes Assessment: Madras HC Dismisses Petition [Read Order]
Recognizing that the assessment reopened well within the time limit, the Madras HC dismissed the petition
Income Reassessment – Time-Limit – Income Escapes Assessment – Madras HC Dismisses Petition – TAXSCAN
Income Reassessment – Time-Limit – Income Escapes Assessment – Madras HC Dismisses Petition – TAXSCAN
In a recent ruling, the Madras High Court ruled that reopening assessment under Section 148 of the Income Tax Act, 1961 within the time limit cannot be interfered with if there was an escapement of income.
Express Infrastructure Private Limited, the petitioner’s assessment was reponed under Section 148 of the Income Tax Act, 1961 by the assessing officer. The petitioner challenged the impugned order dated 04.02.2022 questioning whether the reopening of the assessment under Section 148 of the Income Tax Act, 1961, was justified when the same issues had already been scrutinized during the initial assessment.
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The main issues for reopening the assessment were related to expenses incurred by the petitioner towards Model Flat and New Sales Office Express Exclusive and amounts paid towards foreclosure of loans.
The petitioner submitted before the Madras High Court that the same issues were already considered during the initial scrutiny and reopening the same after the completion of the assessment was without jurisdictional basis.
The petitioner’s counsel argued that the petitioner maintained that the marketing, sales office, and model flat expenses were correctly treated as revenue expenditures because they were incurred for the ongoing project and also argued that the charges, incurred for switching loans, were not related to the project and, therefore, should not be capitalized.
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On the contrary, the respondent’s counsel argued that under Section 147 of the Income Tax Act, before the amendment effective from 01.04.2021, if income chargeable to tax had been under-assessed, it could be deemed as a case where income had escaped assessment. Even after four years, reopening was permissible under certain circumstances. Therefore, the reopening of the assessment was justified.
Justice C. Saravanan observed that the initial assessment conducted on 27.11.2019 already dealt with the marketing, sales office, and model flat expenses, as well as the loan processing charges but there was no determination of tax liability at this stage, and the reassessment was still in progress.
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The court acknowledged that reopening was initiated before the lapse of four years, and there was no scope for interference with the Income Tax authorities' reopening decision if escapement income was found. Therefore, the court dismissed the writ petition and granted liberty to the petitioner to raise all objections before the Assessing Officer during the reassessment process.
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