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.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
A re-assessment order under Section 147, the consequent demand notice and the preceding notice under Section 148 of the Income Tax Act, 1961 are challenged in this writ petition.
2. Learned counsel for the petitioner submits that the petitioner was incorporated on 01.01.2020 and that its first financial year, as per the Companies Act, 2013, rums for a period of 15 months, i.e., from 01.01.2020 to 31.03.2021. Consequently, it is stated that a return of income was filed for the above-mentioned 15 month period for assessment year 2021-22. It is also submitted that a total income of Rs.3,45,55,070/- was declared during the said 15 month period. He also points out that assessment proceedings were concluded in relation for the said 15 month period. On the basis that return of income was not filed to the three months of assessment year 2020-21, he points out that proceedings were initiated and such proceedings culminated in the notice and orders impugned herein. Therefore, learned counsel submits that these proceedings are liable to be set aside.
3. Ms. M. Sheela, learned senior standing counsel, appears on behalf of the first and second respondents. In response to a question as to whether the income in respect of which re-assessment proceedings were initiated was declared in the return of income for assessment year 2021-22, she replied in the affirmative.
4. Thus, it is evident that there was no escaped income and that the petitioner had disclosed the entire income for the 15 month period from 01.01.2020 to 31.03.2021 in the return of income for assessment year 2021-22. This course of action is permissible in terms of Section 2(41) of the Companies Act, 2013. Consequently, the re-assessment order, the consequent demand notice and the notice under Section 148 & 226(3) are all liable to be quashed. By quashing the impugned order and notices, this writ petition is allowed without any order as to costs. Consequently, connected writ miscellaneous petitions are closed. There shall be no order as to costs.
