Justice S.M.Subramaniam held that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. It is categorically stated that the initiation of assessment years is to be taken as AY 1996-97 and the assessee is eligible only for 30% payment of the deduction claim and the remaining 70% is to be taxed. Thus, the deduction under Section 80-IA should be restricted to Rs.26,18,90,989/- and an excess claim of Rs.61,10,78,973/- is to be disallowed. Thus, there is a definite ‘reason to believe that the deduction of Rs.61,10,78,973/- is an excess deduction to the tune of income chargeable to tax as an escaped assessment.

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Aircel failed to provide information on Deductions For Gains from Industrial Undertakings, causing Loss to Revenue: Madras High Court [Read Judgment]

By Mariya Paliwala – On May 23, 2021 1:37 pm
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Aircel – Deductions For Gains – Industrial Undertakings – loss to Revenue – Madras HC – Taxscan

The Madras High Court ruling came as a major setback to Aircel wherein it has been held that the assessee, Aircel has failed to provide information in respect of Deductions For Gains from Industrial Undertakings, causing loss to Revenue.

The petitioner, M/s.Aircel Cellular Limited is engaged in the business of providing Telecommunication Services and operates in the Chennai Circle pursuant to the License granted by the Department of Telecommunications, Government of India. Pursuant to the commencement of business operations during the Assessment Year 1996-97, the petitioner started claiming the deduction under Section 80-IA of the Act from AY 2005-06.

Having been satisfied with the documents as well as the information provided by the petitioner, the Assessing Officer passed a final assessment order under Section 143(3) of the Income Tax Act. The Assessing Officer accepted the contentions of the petitioner for the purpose of claiming benefit under Section 80- IA of the Act. The issues were adjudicated and concluded.

Subsequently, the respondents have initiated proceedings under Section 147 of the Act for reopening of assessment.

The counsel for the petitioner strenuously contended that it is a classic case of change of opinion and cannot be construed as a reason to believe as contemplated under Section 147 of the Income Tax Act. It is visible from the reasons furnished by the Department that they have changed their opinion with reference to the claim made by the petitioner under Section 80-IA of the Act, which was allowed by the Assessing Officer in the original assessment order.

The writ petitioner is of an opinion that there are no new facts or materials available on records for the purpose of reopening of assessment. The material facts already adjudicated by the Assessing Officer in the assessment order, sought to be reopened, which is impermissible under the provisions of Section 147 of the Act.

The counsel for the revenue objected to the contentions raised on behalf of the petitioner by stating that it is not the change of opinion. There are concrete materials to arrive at a conclusion that there is a reason to believe as required under Section 147 of the Act. Even an under assessment or otherwise is a ground for reopening of assessment. In the present case, any erroneous claim made resulting under assessment would constitute a ground for reopening of assessment by the Assessing Officer by invoking Section 147 of the Act.

The counsel for the revenue added that the benefit claimed by the petitioner under Section 80-IA may be the common ground raised. However, the Intricacies and the manner, in which, such claim was made by the petitioner, constitutes a fresh ground for the purpose of reopening of assessment, and therefore, such information or materials is to be construed as new materials, which were not adjudicated by the Assessing officer at the time of passing original assessment order.

The single-judge bench of Justice S.M.Subramaniam held that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. It is categorically stated that the initiation of assessment years is to be taken as AY 1996-97 and the assessee is eligible only for 30% payment of the deduction claim and the remaining 70% is to be taxed. Thus, the deduction under Section 80-IA should be restricted to Rs.26,18,90,989/- and an excess claim of Rs.61,10,78,973/- is to be disallowed. Thus, there is a definite ‘reason to believe that the deduction of Rs.61,10,78,973/- is an excess deduction to the tune of income chargeable to tax as an escaped assessment.

“The petitioner cannot merely say that he has produced all the information. Certain information, which was not provided fully and truly caused loss to the Revenue with reference to the deductions made under Section 80-IA of the Act and such materials identified by the Department, while reopening the assessment must be adjudicated with reference to the documents and evidence available and the petitioner is at liberty to defend his case by submitting his objections or by producing documents and evidence,” the court added.

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