Ground on which the Assessing Officer has found the belief that the income charged under the tax assessment was simply baseless, thus, reopening of assessment was invalid. FACTS: Assessment of assessee was reopened. The reasons recorded by the Assessing Officer for issuing such notice were that the return of income for the A.Y. 2010-11 was filed declaring Nil income. Assessment u/s143(3) was finalized determining the total income Nil.

GUJARAT HIGH COURT

No.- Special Civil Application No. 18911 of 2015

M/s Meghmani Energy Ltd........................................................................ Appellant
Vs.
Deputy Commissioner of Income Tax (OSD) -I........................................ Respondents

Akil Kureshi And Mohinder Pal, JJ.

Date :December 21, 2015

Appearances

For the Appellant : Mr. B.S. Soparkar, Adv.
For the Respondent : Mrs. Mauna M Bhatt, Adv.

Section 147 of the Income Tax Act, 1961 — Reassessment — Ground on which the Assessing Officer has found the belief that the income charged under the tax assessment was simply baseless, thus, reopening of assessment was invalid.
FACTS: Assessment of assessee was reopened. The reasons recorded by the Assessing Officer for issuing such notice were that the return of income for the A.Y. 2010-11 was filed declaring Nil income. Assessment u/s143(3) was finalized determining the total income Nil. Later, on scrutiny of the records, it came to the notice that the Assessee has earned dividend income of ' 15,458/- and same has been added in the computation of total income as income from other sources as dividend on mutual fund was not exempt because funds has been invested to Liquid funds and not in Equity Funds (STT was also not paid on the same so it proves that it is not exempt). After claim of deduction u/s.80-IA from the Gross Total Income, the net taxable income comes to Rs.Nil. Therefore, the tax liability was worked out on book profit u/s.115JB. However, the same has not been added to work out book profit u/s.115JB. As such the dividend income of ' 15,458/- not considered for the working of tax liability on book profit u/s.115JB during the year under consideration was escaped income for the A.Y. 2010-11.AO had the reason to believe that the income chargeable to tax to the extent of ' 15,458/- has been assessed on account of failure on the part of the assessee to disclose fully and truly all material facts pertaining to the A.Y. 2010-11 and no opinion was formed in the original assessment. Assessee raised objections against notice for reopening which were dismissed by the Assessing Officer. Assessee therefore, filed petition before High Court challenging the said notice.
HELD, that from the reasons reproduced, it can be seen that for the year under consideration assessee had earned dividend income of ' 15,458/-. This income was not exempt from tax. The Assessing Officer also in the reasons has noted that assessee had added such amount while computing the total income as income from other sources. However, according to him, while working out book profit under Section 115JB , such amount was not added back and therefore, such dividend income of ' 15,458/-, according to the Assessing Officer, was not considered while working out the tax liability as per Section 115JB. This assertion, however, totally lacks basis. In the computation of income presented by the assessee along with the return of income, the assessee had shown book profit as per Section 115JB of ' 4,23,47,912/-. This figure was significant and would appear in our later observations as well. In the profit and loss account, assessee showed dividend income of ' 15,458/- as income from other sources and showed profit before tax of ' 4,23,47,912/-. For computation of book profit for the purpose of Section 115JB, the assessee adopted such amount of ' 4,23,47,912/- as shown in the profit and loss account. There were no additions and deductions to be made as referred to in Section 115JB and therefore, the final figure of book profit for the said provision came to the said original amount of ' 4,23,47,912/-. Thus for all purposes whether for the computation of income for normal tax provisions or as per the book profit under Section 115JB, the said amount of ' 15,458/- was duly reflected and was accounted for. The Assessing Officer formed wrong belief that for the purpose of computing book profit under Section 115JB of the Act, the said amount of ' 15,458/- disappeared from the consideration. Under the circumstances, notice of reopening being bad in law, was quashed.

ORDER

(Per : Honourable Mr. Justice Akil Kureshi) — 1. Petitioner has challenged notice at Annexure-A dated 5.5.2014 under which the respondent, Assessing Officer, reopened the assessment of the petitioner for the assessment year 2010-11. Such assessment was framed ordinarily after scrutiny under Section 143(3) of the Income Tax Act, 1961 ('the Act' for short).

2. The reasons recorded by the Assessing Officer for issuing such notice read as under:

"In this case, the return of income for the A.Y.2010-11 filed on 20.09.2010 declaring income Nil. Assessment u/s. 143(3) of the Act was finalized determining the total income Nil.

Later, on scrutiny of the records it came to the noticed that the Assessee has earned dividend income of ' 15,458/- and same has been added in the computation of total income as income from other sources as dividend on mutual fund is not exempt because funds has been invested to Liquid funds and not in Equity Funds (STT is also not paid on the same so it proves that it is not exempt). After claim of deduction u/s.80-IA from the Gross Total Income, the net taxable income comes to Rs.Nil. Therefore, the tax liability is worked out on book profit u/s.115JB. However, the same has not been added to work out book profit u/s.115JB. As such the dividend income of ' 15,458/- not considered for the working of tax liability on book profit u/s.115JB during the year under consideration is escaped income for the A.Y. 2010-11.

In view of the above, I have reason to believe that the income chargeable to tax to the extent of ' 15,458/- has been assessed on account of failure on the part of the assessee to disclose fully and truly all material facts pertaining to the A.Y. 2010-11 and no opinion was formed in the original assessment.

In view of above, I am of the opinion that this is a fit case for reassessment by invoking the provisions of Section 147 of the Income Tax Act, 1961".

3. The petitioner raised objections against notice for reopening which were dismissed by the Assessing Officer by an order dated 30.10.2015. The petitioner has, therefore, filed this petition challenging the said notice.

4. Inviting our attention to the reasons recorded by the Assessing Officer, the counsel for the petitioner contended that the reasons lacked validity. He submitted that the ground on which the Assessing Officer has found the belief that the income charged under the tax assessment was simply baseless.

5. We have heard learned counsel, Ms.Bhatt, for the department.

6. From the reasons reproduced above, it can be seen that for the year under consideration petitioner had earned dividend income of ' 15,458/-. This income was not exempt from tax. The Assessing Officer also in the reasons has noted that petitioner had added such amount while computing the total income as income from other sources. However, according to him, while working out book profit under Section 115JB of the Act, such amount was not added back and therefore, such dividend income of ' 15,458/-, according to the Assessing Officer, was not considered while working out the tax liability as per Section 115JB of the Act.

7. This assertion, however, totally lacks basis. In the computation of income presented by the petitioner along with the return of income, the petitioner had shown book profit as per Section 115JB of the Act of ' 4,23,47,912/-. This figure is significant and would appear in our later observations as well. In the profit and loss account, the petitioner showed dividend income of ' 15,458/- as income from other sources and showed profit before tax of ' 4,23,47,912/-. For computation of book profit for the purpose of Section 115JB, the petitioner adopted such amount of ' 4,23,47,912/- as shown in the profit and loss account. There were no additions and deductions to be made as referred to in Section 115JB and therefore, the final figure of book profit for the said provision came to the said original amount of ' 4,23,47,912/-.

8. Thus for all purposes whether for the computation of income for normal tax provisions or as per the book profit under Section 115JB of the Act, the said amount of ' 15,458/- was duly reflected and was accounted for. The Assessing Officer formed wrong belief that for the purpose of computing book profit under Section 115JB of the Act, the said amount of ' 15,458/- disappeared from the consideration.

9. Under the circumstances, notice of reopening being bad in law, is quashed. Petition is disposed of accordingly.

Decided in favour of assessee.

[2015] 37 ITCD 31 (Guj)