PCIT Vs Lanco Hills Technol park pvt. Ltd (Telangana High Court)
Telangana High Court held that as all the material facts were fully and truly disclosed, reopening of assessment on mere change of opinion is unsustainable in law.
Facts- This appeal has been preferred by the revenue u/s. 260A of the Income Tax Act, 1961 against the order passed by ITAT for A.Y. 2010-11.
The issue is that case of the respondent was reopened u/s 147 by issuing notice u/s 148. AO completed the assessment by disallowing the claim towards debiting of Profit & Loss account due to reversal on account of cancellation and price revision.
CIT(A) allowed the appeal of the respondent both on technical and merit ground. Revenue preferred appeal before the Tribunal which was dismissed.
Conclusion- The fact that the reopening of assessment was ordered on mere change of opinion has been upheld by two lower appellate authorities. It is evident that respondent had disclosed fully and truly all material facts to the assessing officer during the assessment proceeding on the basis of which assessment order dated 27.12.2012 was passed under Section 143(3) of the Act. By change of opinion holding that reduction of Rs.113,19,93,808.00 towards reversal on account of cancellation and price revision and deducting the same from the profit and loss account was irregular thereby having reason to believe that taxable income had escaped assessment, the concluded assessment could not have been reopened. At the stage of third round of appeal we do not find any substantial question of law for interference by the High Court under Section 260A of the Act. We are, therefore, of the view that there is no merit in this appeal.
FULL TEXT OF THE JUDGMENT/ORDER OF TELANGANA HIGH COURT
Heard Mr. J.V.Prasad, learned Standing Counsel for Income Tax Department appearing for the appellant.
2. This appeal has been preferred by the revenue as the appellant under Section 260A of the Income Tax Act, 1961 (briefly, ‘the Act’ hereinafter) against the order dated 07.09.2021 passed by the Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad (Tribunal) in I.T.A.No.1021/Hyd/2019 for the assessment year 2010-11.
3. Appellant has proposed the following questions as substantial questions of law:
1. Whether on the facts and in the circumstances of the case, the Tribunal is correct in upholding the orders of the Commissioner of Income Tax (Appeals) – 4?
2. Whether information devoid of corroborative evidence and supporting documents constitute true and full disclosure for the purpose of Section 147 of the Act?
3. Whether on the facts and in the circumstances of the case, the Tribunal is correct in not considering the fact that full details of ‘cancellation & price revision’ were not disclosed by the assessee during the original assessment proceedings and therefore there was failure on the part of the assessee to fully and truly disclose all material facts for completion of assessment?
4. Respondent before us is an assessee under the Act. It is a private limited company engaged in the business of development and sale of office space, residential buildings, commercial complexes etc. For the assessment year 2010-11, it had filed return of income on 25.09.2010 admitting loss of Rs.29,24,79,084.00 after setting off long term capital gain of Rs.3,85,41,685.00. Subsequently respondent filed revised return of income on 27.09.2011 declaring higher loss of Rs.36,03,42,295.00 after setting off long term capital gain of Rs.3,85,41,685.00. Assessing officer passed the assessment order on 27.12.2012 under Section 143(3) of the Act accepting the loss returned on 25.09.2010.
5. Later on, case of the respondent was reopened under Section 147 of the Act by issuing notice under Section 148 dated 31.03.2016. Following the laid down procedure, assessing officer completed the assessment on 27.11.2017 under Section 143(3) read with Section 147 of the Act by disallowing the claim of Rs.113,19,93,808.00 towards debiting to the profit & loss account due to reversal on account of cancellation and price revision. It was held that the same was not an acceptable method of revenue reversal and was accordingly disallowed by adding the same back to the returned income.
6. Aggrieved by the aforesaid order dated 27.11.2017, respondent preferred appeal before the Commissioner of Income Tax (Appeals) 4, Hyderabad (briefly referred to hereinafter as ‘CIT (A)’). By the appellate order dated 30.03.2019, CIT (A) allowed the appeal of the respondent both on technical grounds as well as on merit. It was held that action of the assessing officer in reopening of assessment was bad in law; so also the addition of Rs.113,19,93,808.00 made on account of reversal of revenue due to price revision/cancellation. The same was accordingly directed to be deleted. It was held as follows:
“8.9 From the above analysis it is clear that the appellant has reversed the revenue to the extent of Rs.40.76 crores on account of price revision which is forming part of earlier years revenue recognition to that extent has tabulated below:
