The Income Tax Appellate Tribunal (ITAT) quashed the notice of re-assessment against MRF Ltd.
The assessee company, M/s. MRF Limited is engaged in the business of manufacture and sale of automobile tyres, tubes, and automobile rubber products, filed its return of income for the assessment year 2009-10 on September 30, 2009, admitting a total income of Rs.59.56 Crores. The assessment for the impugned assessment year was completed under section 143(3) of the Income Tax Act, 1961 vide order and assessed total income at Rs.64,42,73,804.
The case has been subsequently reopened under section 147 of the Act, for the reasons recorded as per which income chargeable to tax had been escaped assessment on account of the excess claim of deduction under section 80JJAA of the Income Tax Act for Rs.79,73,230.
The assessee filed objections for reopening assessment and the same has been disposed of vide speaking order. The assessment has been completed under section 143(3) read with section 147 of the Act and determined total income at Rs.66,45,78,250 after making addition towards disallowance of excess claim of deduction under section 80JJAA of the Act, for Rs.72,36,875.
The assessee contended that the CIT(A) erred in upholding reopening of assessment under section147 of the Act, ignoring the fact that the assessment has been reopened beyond the period of 4 years from the end of the assessment year and the original assessment has been completed and in such case, the assessment cannot be reopened unless the AO alleged that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the completion of assessment.
On the other hand, the department has strongly supporting the order of CIT(A) submitted that there is a failure on part of the assessee to disclose fully and truly all material facts necessary for assessment which is evident from the fact that the assessee has made the excess claim of deduction even though the number of employees employed during the year is lesser than what was considered by the assessee to claim deduction u/s. 80JJAA of the Act.
The coram consisting of Mahavir Singh and G.Manjunatha noted that the AO has not recorded the failure, if any, on the part of the assessee. The assessment is re-opened after four years from the end of the assessment year.
The ITAT stated that there are two conditions that need to be fulfilled for undertaking the reassessment.
Firstly, the ITAT mentioned that in such cases, for invoking proper jurisdiction, the AO has to record the reason to believe that any income chargeable to tax escaped for any assessment year.
Secondly, the ITAT has clarified that any income chargeable to tax escaped assessment for such assessment year by reason of the failure on the part of the assessee.
The ITAT held that the second condition was not fulfilled and the notice issued under section 148 has no legal sanction and hence the impugned assessment is quashed.
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