IFC IVF Private Limited Vs JCIT (Madras High Court)
Summary: Madras High Court held that reassessment proceedings could not be sustained where the assessee-company had already disclosed its entire income for its first 15-month financial year in the return filed for Assessment Year 2021-22. The petitioner-company was incorporated on 01.01.2020. Its first financial year extended from 01.01.2020 to 31.03.2021, covering 15 months, and it filed its return of income for AY 2021-22 for that entire period, declaring total income of Rs.3,45,55,070/-. Assessment proceedings in respect of the said period had also been concluded.
The Income Tax Department nevertheless initiated reassessment proceedings on the premise that no return had been filed separately for the initial three-month period corresponding to AY 2020-21. These proceedings resulted in a reassessment order under Section 147, a consequent demand notice, a notice under Section 148 and proceedings under Section 226(3) of the Income Tax Act, 1961. Before the High Court, the Department’s senior standing counsel affirmatively acknowledged that the income in respect of which reassessment had been initiated was already disclosed by the petitioner in its return for AY 2021-22.
The High Court held that there was consequently no escaped income. The petitioner’s adoption of the 15-month period from 01.01.2020 to 31.03.2021 as its first financial year was permissible under Section 2(41) of the Companies Act, 2013, which permits the first financial year of a company incorporated on or after 1 January to end on 31 March of the following year. Since the entire income for that period had already been disclosed in AY 2021-22, the very foundation for treating income as having escaped assessment did not survive. Accordingly, the High Court quashed the reassessment order, consequent demand notice and notices under Sections 148 and 226(3), allowed the writ petition and closed the connected miscellaneous petitions without any order as to costs.
