2004 (5) TMI 23 - HC - Income Tax

Reopening of assessment - reason to believe that there was any escapement of income chargeable to tax - petitioner receives commission from airlines, for booking with hotels, airlines, railways and other transporters for tourists - claim was made under section 80HHD - The relevant facts were taken into consideration by the Assessing Officer while making the assessment which we have indicated hereinabove and, therefore, there is no question of any escapement of income chargeable to income-tax. Therefore, in our opinion, this is a case of wrongful assumption of jurisdiction and as such the notices, the speaking orders and the assessment orders made in pursuance of the notices are required to be quashed and set aside and are accordingly set aside. - The petition is allowed

Summary

Issues:
Challenge to the reopening of assessment under section 147 of the Income-tax Act, 1961 for the years 1996-97 and 1997-98 based on deduction claimed under section 80HHD.

Detailed Analysis:

The petitioner, a travel agency engaged in tour operations, challenged the reopening of assessment by the respondent under section 147 of the Income-tax Act, 1961, for the years 1996-97 and 1997-98. The petitioner claimed deductions under section 80HHD for both years, supported by a report from a chartered accountant. However, the Assessing Officer allowed a lower deduction than claimed. Subsequently, notices were issued under section 148 of the Act, stating that income had escaped assessment. The petitioner contended that there was full disclosure and objected to the reassessment, arguing against the assumption of jurisdiction merely on a change of opinion. The court directed the Assessing Officer to pass a speaking order before proceeding with reassessment, but instead, assessment orders were passed without addressing the objections raised. The court set aside the assessment orders, emphasizing the importance of full and true disclosure of primary facts by the assessee for assessment purposes.

The petitioner argued that the Assessing Officer had already examined the deduction claim under section 80HHD during the original assessment, indicating a conscious consideration of facts and applicable provisions of the Act. The court highlighted that if all facts were presented and considered during the original assessment, reassessment based on a change of opinion was not justified. Referring to precedents, the court emphasized the duty of the assessee to disclose primary facts fully and truthfully, with the Assessing Officer responsible for drawing inferences and legal conclusions. The court found that in this case, there was no justification for reassessment as all relevant facts had been disclosed and considered during the original assessment, leading to the quashing of the notices, speaking orders, and assessment orders.

In conclusion, the court allowed the petition, setting aside the reassessment orders, and emphasized the importance of full and true disclosure of primary facts by the assessee for a fair assessment process.