IMPORTANT POINT
Reassessment under Section 147 after four years requires proof of failure to disclose material facts, which was not demonstrated in this case.

JUDGMENT :

(Somasekhar Sundaresan J.) :

1. Rule. With the consent of the parties, rule is made returnable forthwith and the Writ Petition is taken up for final disposal.

2. This Writ Petition challenges the reassessment proposed to be undertaken by the Revenue, of the income tax return filed by the Petitioner-Bank for the Assessment Year 2015-16. The notice dated 30th March, 2021 initiating reassessment (“Impugned Notice”) issued under Section 147 read with Section 148 of the Income Tax Act, 1961 (“the Act”) has been approved under Section 151 of the Act on the premise that income had escaped assessment owing to absence of full and true disclosures by the Petitioner at the time of the original assessment.

Factual Background and Context:

3. The original assessment was made pursuant to an order dated 22nd December, 2017 (“Assessment Order”) after scrutiny of the returns filed by the Petitioner. The Petitioner had originally declared a total income of Rs. 95.14 Crores. Pursuant to a notice for scrutiny under Section 143(2) dated 29th July, 2016. Another notice dated 27th November, 2017 was issued under Section 142(1), along with a questionnaire. Eventually, an Assessment Order was passed computing total income of Rs. 105.14 Crores, after disallowance of a deduction in the sum of Rs. 10 Crores.

4. Five years after the end of the Assessment Year, the Impugned Notice was issued. On the Petitioner seeking reasons underlying the Impugned Notice, reasons were communicated to the Petitioner vide letter dated 6th August, 2021. The relevant contents are extracted below:-

2. On perusal of records, it is seen that the assessee in its computation of income has claimed deduction with a narration Leasehold improvement cost of Rs.49,78,007/-. Explanation-1, to section 32(1), which required that the capital expenditure incurred on leasehold building not owned by assessee qualifies for depreciation @10% prescribed I.T. Rules, 1962. Taking into consideration this statutory mandate the claim of deduction of Leasehold improvement cost bears the characters of capital expenditure and therefore cannot be considered for the deduction u/s. 37(1) of the I.T. Act. Accordingly non disallowance of the same under assessment to the extent of Rs.44,80,203/- after considering depreciation.

2.1 Further, on perusal of Profit & Loss a/c., it is seen that the assessee has debited Rs. 44,13,500/- on account of donation. However, in computation of total income, the donation has not been disallowed while calculating the total taxable income.

2.2 Further, on perusal of P&L A/c., it is seen that the other expenses debited to P&L A/c. also include amortization of investment amounting to Rs.23,63,82,651/-. The nature of expenditure/loss claimed on this account is capital in nature which is inadmissible by virtue of Sec.37(1) of the I.T. Act, 1961.

2.3 Further, on perusal of report u/s. 44AB especially clause 34C of the same it is observed that auditors have quantified interest u/s. 201(1A) total of which works to Rs.46,446/. On perusal of computation of income it observed that no disallowance has been made. These facts were not discussed by the assessing officer while finalising the assessment. The same has not been brought to the notice of the assessing officer by the assessee with a view to conceal the above facts from the assessing officer.

3. Hence, it is clear that there is failure on the part of assessee to disclose fully and truly all material facts necessary for the assessment for the year in question within the meaning of First provision to section 147(1) of the Act.

4. Even if tax rate of 30 percent is considered (ignoring surcharge and cess), the tax sought to be evaded amounts to Rs. 7,35,96,840/- which is above is Rs. 1,00,000/- As stated earlier, the assessee has not disclosed any of these facts at the time of original proceedings. Accordingly, the juristic requirements for reopening the assessment are satisfied.

[Emphasis Supplied]

5. By a letter dated 4th September, 2021