2004 (3) TMI 13 - HC - Income Tax

Reopening the assessment after the expiry of four years - jurisdiction of the Assessing Officer to initiate the proceedings which were barred by time - It is apparent from the reasons that the Assessing Officer did not hold any belief that escapement of income chargeable to tax from the assessee was on account of any failure on the part of the assessee to disclose truly and fully all material facts necessary for his assessment for the assessment year 1996-97. Thus, it was clearly a case falling within the ambit of the proviso to section 147 and notices issued after January 31, 2001, were clearly barred by time. Thus, the Assessing Officer had no jurisdiction to issue the notices.

Summary

Issues:
Jurisdiction of Assessing Officer to initiate proceedings after the expiry of limitation period under Section 147 of the Income-tax Act, 1961.

Analysis:
The case involved a challenge to the jurisdiction of the Assessing Officer to reopen the assessment for the assessment year 1996-97 after the expiry of four years from the end of the relevant assessment year. The Assessing Officer issued a notice for reopening the assessment, and the reasons for such reopening were communicated to the assessee. The crux of the matter was whether the reasons recorded had a relevant nexus with the formation of belief by the Assessing Officer for initiating action under Section 147. The sufficiency of reasons is not reviewable, but their nexus with the formation of belief is subject to judicial review.

The limitation period for initiating action under Section 147 is governed by Section 149 read with the proviso to Section 147. The proviso restricts the initiation of action after four years from the end of the relevant assessment year unless income has escaped assessment due to the failure of the assessee to disclose fully and truly all material facts necessary for assessment. In this case, the reasons recorded by the Assessing Officer did not establish any failure on the part of the assessee to disclose material facts necessary for assessment.

The court emphasized that the duty of the assessee is to disclose fully and truly all primary facts, and once this duty is fulfilled, the Assessing Officer must draw inferences and frame the assessment. The court cited the Calcutta Discount Co. Ltd. case to highlight that the assessee is not required to communicate inferences to the assessing authority. In this case, the Assessing Officer lacked jurisdiction to initiate proceedings as the reasons recorded did not indicate any failure on the part of the assessee to disclose material facts.

The court rejected the argument that the objection could be raised before the Assessing Officer, emphasizing that the case clearly fell within the proviso to Section 147, making the notices issued after the limitation period barred by time. As there was a patent lack of jurisdiction based on the Assessing Officer's own reasons, the court allowed the writ petition, quashing the impugned notices without costs.