Whether Re-Assessment based on Subsequent Decision of Supreme Court Valid?
Parties : Calcutta Club Ltd. vs. ITO
Decision of : Hon’ble Calcutta High Court
Date of Order : February 14, 2020
WP No. 719/2014
Issue relating to : Re-assessment based on subsequent decision of SC.
FACTS OF THE CASE :
During the course of regular assessment, based on certain judicial precedents of various High Courts, assessee claimed exemption of the interest income on the ‘principle of mutuality’. AO accepted the said claim of the assessee.
Subsequently, Hon’ble Supreme Court in the case of Bangalore Club v. CIT [2013] 350 ITR 509 (SC) reversed the decisions of High Courts (as relied by the assessee) and held interest income as taxable.
After the expiry of 4 years, AO reopened the assessment citing the above decision of the Supreme Court and contended that income of the assessee had escaped assessment. However, in the reasons recorded, it was nowhere stated that there was any omission or failure on the part of the assessee in disclosing fully and truly the material facts necessary for assessment.
QUESTION BEFORE THE HON’BLE HIGH COURT :
Whether re-assessment can be held valid in the above circumstances of the case?
FINDINGS AND DECISION OF THE HON’BLE TRIBUNAL :
Hon’ble High Court quashed the entire re-assessment proceedings, observing that the notice u/s. 148 was issued after the expiry of four years from the end of the relevant AY; but without whisper about any omission or failure on the part of the assessee to disclose fully and truly material facts for assessment.
Reliance was placed on the decision of Hon’ble Supreme Court in the case of Simplex Concrete Piles (India) Ltd. v. DCIT [2013] 358 ITR 129 (SC) wherein it was held that the subsequent reversal of the legal position by the judgment of the Supreme Court does not authorize the Department to reopen the assessment, which stood closed on the basis of the law, as it stood at the relevant time.
Following the above, Hon’ble High Court held that subsequent decision of the Supreme Court reversing the legal position prevailing at the time of regular assessment cannot be called an omission or failure on the part of the assessee in disclosing fully and truly the material facts necessary for relevant assessment.
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