PCIT Vs Haldia Petrochemicals Ltd. (Calcutta High Court)
Summary: The Calcutta High Court dismissed the Revenue’s appeal filed under Section 260A of the Income Tax Act, 1961, against the order dated 24 March 2021 passed by the Income Tax Appellate Tribunal, Kolkata, in ITA No. 2455/Kol/2019 for Assessment Year 2008-09. The dispute concerned the validity of reassessment proceedings culminating in an assessment order dated 21 January 2016 and the disallowance of Rs.6,92,90,000 claimed towards provision for Value Added Tax (VAT). The Tribunal had quashed the reassessment proceedings as legally unsustainable. The Revenue challenged this conclusion, contending that the Tribunal had incorrectly invalidated the reopening and deleted the resulting addition.
Read SC Judgment in this case: SC Declines to Interfere With Quashing of Reassessment Against Haldia Petrochemicals
The Revenue argued that the Tribunal had overlooked the circumstances surrounding disclosure of the relevant facts, particularly the information appearing in the notes to accounts for Assessment Year 2009-10 rather than Assessment Year 2008-09. The principal issue before the High Court was whether the Assessing Officer had validly reopened the assessment under Section 147 by issuing a notice under Section 148. On examining the recorded reasons, the High Court found that the Assessing Officer had not alleged any failure by the assessee to disclose fully and truly the material facts necessary for assessment. Instead, the reasons reflected a fresh appraisal of material already available in the books of account.
The High Court held that the Tribunal was justified in declaring the reassessment invalid. The Court emphasized that the recorded reasons must disclose the necessary failure by the assessee to furnish material facts, and that reconsideration of existing accounting material cannot, in the circumstances of the case, justify reopening. Since the Revenue failed to demonstrate any substantial question of law arising from the Tribunal’s findings, the appeal was dismissed. Separately, the Court condoned a delay of 378 days in filing the Revenue’s appeal, granting the benefit of the Supreme Court’s limitation-extension order. Consequently, GA/1/2022 was allowed, ITAT/252/2022 was dismissed, and GA/2/2022 was closed.
FULL TEXT OF THE JUDGMENT/ORDER OF CALCUTTA HIGH COURT
The Court : – Heard respective Counsel for either side.
There is a delay of 378 days in filing the appeal. From the relevant dates we find that the appellant department would be entitled to the benefit of the order passed by the Hon’ble Supreme Court extending the period of limitation for filing appeal under various Statutes. Hence, for such reason the application is allowed and the delay in filing the appeal is condoned.
ITAT/252/2022
This appeal by the revenue filed under Section 260A of the Income Tax Act, 1961, (the Act) is directed against the order dated 24.3.2021 passed by the Income Tax Appellate Tribunal “B” Bench, Kolkata (the Tribunal) in ITA No. 2455/Kol/2019 for the assessment year 2008-2009. The revenue has raised following substantial questions of law for consideration :-
i) Whether in the facts and circumstances of the case and in law the Learned Tribunal exceeded its jurisdiction and erred in holding that re-opening of assessment is bad in law and in quashing the assessment order dated 21.01.2016?
ii) Whether in the facts and circumstances of the case and in law, the Learned Income Tax Appellate Tribunal has erred in quashing the reopening of assessment order under section 148 of the Act as bad in law thereby deleting the addition made on the basis of disallowance of Rs.6,92,90,000/- claimed on account of Provision of VAT ?
iii) Whether in the facts and circumstances of the case and in law the Learned Tribunal erred in holding that in the reason recorded for reopening there is no allegation of failure on the part of the assessee in AY 2008-2009 to truly and fully disclose material facts and also ignoring the fact that true and full facts are provided in the notes on accounts for subsequent Assessment Year 2009-10 and not in the subject Assessment Year 2008-09 which led the Assessing Officer to reopen the assessment ?
The short issue, which falls for consideration, is whether the reopening of the assessment was validly done. The learned Tribunal on going through the reasons for reopening recorded the findings on fact that there was no allegation made by the assessing officer that there was failure on the part of the assessee to truly and validly disclose material facts necessary for the assessment. We have perused the reasons for reopening which have been extracted in the assessment order dated 21.1.2016 passed under Section 147 read with Section 154 and Section 143(3) of the Act.
From the reasons it is evidently clear that material already available in the books of accounts have been re-apprised by the assessing officer and notice under Section 148 has been issued. The manner of such reopening has been frowned upon in several decisions as the fundamental principles of law is that the reason should disclose failure on the part of the assessee to truly and validly disclose material facts necessary for the assessment. In the absence of any such allegations against the assessee the Tribunal was fully justified in re-appreciating the fact and coming to the conclusion that the reopening of the assessment was bad in law. Thus we find that there is no substantial questions of law arising for consideration in this appeal.
Consequently, the appeal fails and dismissed.
The application being GA/2/2022 stands closed.
