Madras HC disallows Reassessment Proceedings merely on Change of Opinion [Read Judgment]

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The Madras High Court has disallowed the Reassessment proceedings merely on his change of opinion on the basis of the same facts and circumstances which has already been considered by him during the original assessment proceedings.

The Court has also observed that, an issue of disallowance once decided in the regular assessment cannot be reopened by way of reassessing.

The Writ Petition is filed under Article 226 of the Constitution of India, to quash both the order and notice issued by the respondents under Section 148 read with Section 147 of the Income Tax Act. The point in consideration is whether the respondents are justified in reopening the assessment.

The petitioner pointed out that even in the order of original assessment, the issue of disallowance has been discussed and disallowance was made as per the method adopted in the previous year. An issue once decided in the regular assessment cannot be reopened by way of reassessing.

The respondents submitted in the light of decisions in Coca Cola India Inc. Vs. Additional Commissioner of Income Tax and others (2010) 15 SCC 215, Honda Siel Power Products Limited vs. Deputy Commissioner of Income Tax (2012) 12 SCC 762 and Jeans Knit (P) Ltd vs Deputy Commissioner of Income Tax, Circle 11(5), Bangalore (2014) 50 taxmann.com 319 (Karnataka) that the case stood reopened for proper disallowance under Section 14 A of the Act. The assessee raised objections to the reopening and that the same was rejected but, the petitioner has not chosen to challenge the same in this writ petition.  And also the assessee did not disclose fully and truly all material facts in respect of the expenditure towards earning the income which does not form part of the total income. So the disallowance under Section 14 A of the Act could not be correctly computed.

Disallowance under Section 36 could not be properly computed in the original order of assessment due to non-furnishing of full and true particulars concerning the Branches. They said that mere production of account books before the assessing officer will not necessarily amount to disclosure. They have opposed the stand of the petitioner that the time limit for notice to be issued under Section 148 is 4 years. According to them, the limitation is 6 years in this case. And also points out by Placing reliance on the decision of the Hon’ble Supreme Court reported in Raymond Woollen Mills vs. ITO) (2008) 14 SCC 218, that the sufficiency or insufficiency of the reasons assigned in the notice of reopening of assessment cannot be the subject matter of adjudication in a writ petition.

While allowing the Appeal, Justice G.R.Swaminathan observed that there is no failure on the part of the assessee. On the other hand, there appears to be a failure on the part of the assessing officer to make an appropriate determination of the amount of expenditure in terms of Section 14 A of the Income Tax Act. This is particularly because the attempt to reopen is made after the expiry of 4 years from the end of the assessment year and the original assessment was made under Section 143(3). The authority cannot take advantage of their own wrong. If they failed to perform their statutory duty, the consequence of default cannot fall on the assessee.

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