The reassessment cannot increase my tax at all because I am assessed on book profit anyway. Is there anything in the Act that lets me have the proceedings dropped rather than fight them?
Yes — s.152(2). Where an assessment is reopened under s.147, an assessee who has not impugned any part of the original assessment order under ss.246 to 248 or s.264 may claim that the proceedings be dropped on showing that he has been assessed on an amount not lower than what he would rightly be liable for even if the income said to have escaped had been taken into account. On that footing the Bombay High Court held the officer had no jurisdiction to reopen and quashed the notice and the order rejecting the objections.
Decided by the High Court (K. R. Shriram J and Neela Gokhale J) on 2023-10-06, reported as Writ Petition No. 2213 of 2014 (High Court of Judicature at Bombay). It bears on section 152, section 147, section 148, section 115JA, section 264 of the Income Tax Act 1961, in Reassessment & Reopening and Assessment & Scrutiny matters.
s.152(2) is a provision almost nobody pleads, and it is a complete answer in a common situation: the company pays under the minimum-alternate-tax computation, the reopening goes to an item under the normal provisions, and even if the department wins outright the tax does not move. The court's route was not only s.152(2) — it also held there was no fresh tangible material and that the officer could not proceed on the footing that some hypothetical income might be detected on further investigation — but s.152(2) is the ground that does not depend on the quality of the reasons. Two limits matter. First, the sub-section is barred to an assessee who has impugned any part of the original assessment order for that year under ss.246 to 248 or s.264, so it is unavailable where you have appealed the original order. Second, the department's stock answer is the one made here — that an excessive loss claimed is itself deemed escaped income because it could be carried forward — and the answer to it on these facts was an affidavit establishing that the loss had in fact never been set off in any later year. That affidavit, uncontroverted, is what carried the case; the plea should be made on evidence, not assertion.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For AY 1999-2000 the petitioner's return was processed under s.143(1). It had claimed a total loss of Rs 10,73,749, made up of a business loss of Rs 7,39,333 and a capital loss of Rs 3,34,416, under the normal provisions, and had offered book profit of Rs 1,13,25,826 to tax with tax thereon of Rs 11,89,213 under s.115JA. On 8 April 2005 a notice under s.148 was issued. The recorded reasons alleged that the petitioner had overstated the cost of acquisition of 2,00,000 shares of Gammon India Limited, taking it at Rs 242.01 instead of Rs 248.88 per share. The return and computation had disclosed that the shares were purchased in FY 1995-96 for Rs 4,97,75,438, which works out to Rs 248.88 per share. The petitioner objected by letter of 27 January 2014; the objections were rejected on 4 February 2014. A director's affidavit affirmed on 5 April 2022 stated that there was no change in the book profit computation, that the taxable income and tax payable remained the same, that on the reasons recorded the loss claimed in the original return was wiped off and converted into a small total income, and that although the loss was eligible to be carried forward for eight years the petitioner had not claimed any set off in the subsequent years and had filed returns up to AY 2005-06 without claiming it. No affidavit was filed denying those averments.
Rule was made absolute. The notice dated 8 April 2005 and the order dated 4 February 2014 rejecting the objections were quashed and set aside. The officer had no jurisdiction to reopen because no income had in fact escaped assessment: even on the Revenue's own case the petitioner remained liable on book profits under s.115JA and there was no fresh tangible material, and s.152(2) requires the proceedings under s.147 to be dropped where the assessee establishes that he has been assessed on an amount not lower than what he would rightly be liable for even if the income alleged to have escaped assessment were taken into account.
The Revenue argued that an excessive loss claimed could be carried forward and would be deemed escaped income chargeable to tax. The court set out s.152(2) in full and then turned to the director's uncontroverted affidavit showing that the book profit computation was unchanged, that the tax payable was the same, and that the loss had never in fact been set off in any later year. It held that the officer had failed to appreciate that he had no jurisdiction to reopen because no income had in fact escaped assessment: even accepting the allegation about the long-term capital loss, the petitioner continued to be liable to tax on book profits under s.115JA. The court refused the contention that one had to take into account the position that might arise from further additions in the final assessment order, holding that the officer had no jurisdiction to proceed on the basis that some hypothetical income might be detected as a result of further investigations. On the reasons themselves, the complete facts about the cost of acquisition had been disclosed in the return and computation, so there was no fresh tangible material. Since the tax on book profits under s.115JA would in any event be higher than the tax on the computation under the normal provisions, s.152(2) required the proceedings to be dropped. The court reproduced paragraphs 9 to 12 of the Gujarat High Court in Motto Tiles (P.) Ltd. v. ACIT, which had applied s.152(2) and India Gelatine and Chemicals Ltd. to hold that where even the entire proposed addition would make no difference to the tax liability because the assessee remained assessable on the same book profit, it could not be said that there was sufficient material for the belief that income chargeable to tax had escaped assessment.
The provisions of Section 152(2) of the Act states proceedings under Section 147 of the Act will be dropped if the assessee is able to establish that he had been assessed on an amount or the sum not lower than what he would be rightly liable for even if the income alleged to have escaped assessment had been taken into account.
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Handle my notice → Ask a CA on WhatsAppYes — s.152(2). Where an assessment is reopened under s.147, an assessee who has not impugned any part of the original assessment order under ss.246 to 248 or s.264 may claim that the proceedings be dropped on showing that he has been assessed on an amount not lower than what he would rightly be liable for even if the income said to have escaped had been taken into account. On that footing the Bombay High Court held the officer had no jurisdiction to reopen and quashed the notice and the order rejecting the objections. This was decided by the High Court (K. R. Shriram J and Neela Gokhale J) and bears on section 152, section 147, section 148, section 115JA, section 264 of the Income Tax Act 1961. It is reported as Writ Petition No. 2213 of 2014 (High Court of Judicature at Bombay). s.152(2) is a provision almost nobody pleads, and it is a complete answer in a common situation: the company pays under the minimum-alternate-tax computation, the reopening goes to an item under the normal provisions, and even if the department wins outright the tax does not move. The court's route was not only s.152(2) — it also held there was no fresh tangible material and that the officer could not proceed on the footing that some hypothetical income might be detected on further investigation — but s.152(2) is the ground that does not depend on the quality of the reasons. Two limits matter. First, the sub-section is barred to an assessee who has impugned any part of the original assessment order for that year under ss.246 to 248 or s.264, so it is unavailable where you have appealed the original order. Second, the department's stock answer is the one made here — that an excessive loss claimed is itself deemed escaped income because it could be carried forward — and the answer to it on these facts was an affidavit establishing that the loss had in fact never been set off in any later year. That affidavit, uncontroverted, is what carried the case; the plea should be made on evidence, not assertion. If it applies to you, the first step is this: Before drafting objections, compute the tax on the reasons recorded taken at their highest and compare it with the tax already assessed. If the figure does not move, s.152(2) is in play.
For AY 1999-2000 the petitioner's return was processed under s.143(1). It had claimed a total loss of Rs 10,73,749, made up of a business loss of Rs 7,39,333 and a capital loss of Rs 3,34,416, under the normal provisions, and had offered book profit of Rs 1,13,25,826 to tax with tax thereon of Rs 11,89,213 under s.115JA. On 8 April 2005 a notice under s.148 was issued. The recorded reasons alleged that the petitioner had overstated the cost of acquisition of 2,00,000 shares of Gammon India Limited, taking it at Rs 242.01 instead of Rs 248.88 per share. The return and computation had disclosed that the shares were purchased in FY 1995-96 for Rs 4,97,75,438, which works out to Rs 248.88 per share. The petitioner objected by letter of 27 January 2014; the objections were rejected on 4 February 2014. A director's affidavit affirmed on 5 April 2022 stated that there was no change in the book profit computation, that the taxable income and tax payable remained the same, that on the reasons recorded the loss claimed in the original return was wiped off and converted into a small total income, and that although the loss was eligible to be carried forward for eight years the petitioner had not claimed any set off in the subsequent years and had filed returns up to AY 2005-06 without claiming it. No affidavit was filed denying those averments. The matter was decided on 2023-10-06 by the High Court (K. R. Shriram J and Neela Gokhale J). On those facts the High Court held as follows. Rule was made absolute. The notice dated 8 April 2005 and the order dated 4 February 2014 rejecting the objections were quashed and set aside. The officer had no jurisdiction to reopen because no income had in fact escaped assessment: even on the Revenue's own case the petitioner remained liable on book profits under s.115JA and there was no fresh tangible material, and s.152(2) requires the proceedings under s.147 to be dropped where the assessee establishes that he has been assessed on an amount not lower than what he would rightly be liable for even if the income alleged to have escaped assessment were taken into account.
The Revenue argued that an excessive loss claimed could be carried forward and would be deemed escaped income chargeable to tax. The court set out s.152(2) in full and then turned to the director's uncontroverted affidavit showing that the book profit computation was unchanged, that the tax payable was the same, and that the loss had never in fact been set off in any later year. It held that the officer had failed to appreciate that he had no jurisdiction to reopen because no income had in fact escaped assessment: even accepting the allegation about the long-term capital loss, the petitioner continued to be liable to tax on book profits under s.115JA. The court refused the contention that one had to take into account the position that might arise from further additions in the final assessment order, holding that the officer had no jurisdiction to proceed on the basis that some hypothetical income might be detected as a result of further investigations. On the reasons themselves, the complete facts about the cost of acquisition had been disclosed in the return and computation, so there was no fresh tangible material. Since the tax on book profits under s.115JA would in any event be higher than the tax on the computation under the normal provisions, s.152(2) required the proceedings to be dropped. The court reproduced paragraphs 9 to 12 of the Gujarat High Court in Motto Tiles (P.) Ltd. v. ACIT, which had applied s.152(2) and India Gelatine and Chemicals Ltd. to hold that where even the entire proposed addition would make no difference to the tax liability because the assessee remained assessable on the same book profit, it could not be said that there was sufficient material for the belief that income chargeable to tax had escaped assessment. In the words reproduced by the source cited on this page: "The provisions of Section 152(2) of the Act states proceedings under Section 147 of the Act will be dropped if the assessee is able to establish that he had been assessed on an amount or the sum not lower than what he would be rightly liable for even if the income alleged to have escaped assessment had been taken into account." The decision followed or applied Motto Tiles (P.) Ltd. v. Assistant Commissioner of Income Tax, Morbi Circle (Gujarat High Court) — paragraphs 9 to 12 reproduced and applied; India Gelatine and Chemicals Ltd. v. Assistant Commissioner of Income Tax (No.1) (Gujarat High Court) — relied on through the Motto Tiles extract.
It was decided by the High Court on 2023-10-06 and is reported as Writ Petition No. 2213 of 2014 (High Court of Judicature at Bombay). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 152, section 147, section 148, section 115JA, section 264, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. Rule was made absolute. The notice dated 8 April 2005 and the order dated 4 February 2014 rejecting the objections were quashed and set aside. The officer had no jurisdiction to reopen because no income had in fact escaped assessment: even on the Revenue's own case the petitioner remained liable on book profits under s.115JA and there was no fresh tangible material, and s.152(2) requires the proceedings under s.147 to be dropped where the assessee establishes that he has been assessed on an amount not lower than what he would rightly be liable for even if the income alleged to have escaped assessment were taken into account. It arises in Reassessment & Reopening and Assessment & Scrutiny matters, on section 152, section 147, section 148, section 115JA, section 264 of the Income Tax Act 1961, and was decided by K. R. Shriram J and Neela Gokhale J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Check the disqualification first: have you impugned any part of the original assessment order for that year under ss.246 to 248 or under s.264? If you have, s.152(2) is not available to you. Make the claim expressly under s.152(2) in the objections to the recorded reasons, in terms — do not leave it as an arithmetic observation buried in a merits reply. Support it with an affidavit of a director or the assessee, exhibiting the computation, the book profit figure and the tax paid, and dealing with any loss claimed: state whether it was ever carried forward or set off, and in which years returns were filed without claiming it. Anticipate the carried-forward-loss answer. If the loss was never set off there is no revenue effect, and the department must file an affidavit denying it if it wants to dispute that. If the officer rejects the objections anyway, the remedy taken here was a writ petition against both the notice and the order rejecting the objections.
Validity check could not be completed. Later treatment was NOT checked and no appeal history was traced. The Motto Tiles extract records that the Revenue had accepted the Gujarat High Court's decision in India Gelatine and had not challenged it, and that the Gujarat High Court declined to refer the question to a larger Bench; that is what the extract says, and neither of those Gujarat judgments was read for this entry. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This is a pre-2021 reassessment case: the notice is dated 8 April 2005 for AY 1999-2000 and the objections were rejected on 4 February 2014, so the procedure discussed is the pre-s.148A regime and nothing here decides how s.152(2) interacts with the s.148A machinery. Paragraphs 4 to 12 were obtained verbatim; paragraphs 1 to 3 were not retrieved and the counsel appearing are named in the order only by surname (Mr. Suresh Kumar for the Revenue, Mr. Pardiwalla for the petitioner). Paragraph 5 of the order reproduces s.152(2) and paragraph 10 reproduces paragraphs 9 to 12 of the Gujarat High Court in Motto Tiles; the Gujarat judgment itself was NOT separately retrieved for this entry. The order refers to Section 115JA for this assessee and to Section 115JB in the Motto Tiles extract; the two are different sections and the difference is in the source, not a transcription slip. No ITR citation was located. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Rule was made absolute. The notice dated 8 April 2005 and the order dated 4 February 2014 rejecting the objections were quashed and set aside. The officer had no jurisdiction to reopen because no income had in fact escaped assessment: even on the Revenue's own case the petitioner remained liable on book profits under s.115JA and there was no fresh tangible material, and s.152(2) requires the proceedings under s.147 to be dropped where the assessee establishes that he has been assessed on an amount not lower than what he would rightly be liable for even if the income alleged to have escaped assessment were taken into account.
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My return was only processed under 143(1). Does that stop the department reopening it later?
How much am I actually required to disclose — and can they reopen because the officer drew the wrong conclusion?
The sanctioning authority just wrote 'yes' and signed. Is that a sanction?
A reassessment was done in between. Does the two-year clock for s.263 restart from it?