2004 (11) TMI 98 - HC - Income Tax

Challenge in this writ petition is to the validity of notice u/s 148 by which proceedings u/s 147 have been initiated to reassess the income for the assessment year 1997-98 which is alleged to have escaped assessment. - there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year 1997-98. Accordingly the initiation of proceedings under section 147 after the expiry of four years from the end of the assessment year is wholly without jurisdiction. - Accordingly we allow this writ petition and quash the impugned notice under section 148

Issues Involved:
1. Validity of the notice under section 148 of the Income-tax Act, 1961.
2. Initiation of proceedings under section 147 for reassessment.
3. Allegation of income escaping assessment.
4. Requirement to disclose fully and truly all material facts necessary for assessment.
5. Applicability of deductions under section 80-IA in the computation of book profits under section 115JA.
6. Limitation period for initiating reassessment proceedings.

Detailed Analysis:

1. Validity of the notice under section 148 of the Income-tax Act, 1961:
The court examined the validity of the notice dated September 19, 2003, issued under section 148, which initiated reassessment proceedings under section 147. The notice was challenged on the grounds that it was based on a mere change of opinion by the Assessing Officer and that all material facts had been fully and truly disclosed by the assessee in the original assessment.

2. Initiation of proceedings under section 147 for reassessment:
The court scrutinized the reasons provided by the Assessing Officer for initiating reassessment proceedings. The primary reason was the alleged improper claim of deduction under section 80-IA while computing book profits under section 115JA. The court noted that the original assessment under section 143(3) had already examined and accepted the claim, and the reassessment was sought after the expiry of four years from the end of the relevant assessment year.

3. Allegation of income escaping assessment:
The Assessing Officer believed that the income chargeable to tax had escaped assessment due to the assessee's failure to disclose all material facts. The reasons included discrepancies in the computation of book profits and the non-disclosure of profit and loss accounts for earlier years, which were deemed necessary for determining the eligibility for deductions under section 80-IA.

4. Requirement to disclose fully and truly all material facts necessary for assessment:
The court emphasized that for reassessment proceedings initiated after four years, it was necessary to establish that the escapement of income was due to the assessee's failure to disclose fully and truly all material facts. The court found that the assessee had attached the profit and loss account for the assessment year 1997-98 with the return, and there was no requirement to furnish accounts for earlier years. The court concluded that the Assessing Officer's claim of non-disclosure was baseless and not supported by the facts.

5. Applicability of deductions under section 80-IA in the computation of book profits under section 115JA:
The court examined the Assessing Officer's contention that the deduction under section 80-IA was wrongly claimed in the computation of book profits under section 115JA. The court noted that the claim had been accepted in the original assessment and subsequent orders, and the reassessment was based on a change of opinion rather than new facts or evidence.

6. Limitation period for initiating reassessment proceedings:
The court highlighted the proviso to section 147, which restricts the initiation of reassessment proceedings after four years from the end of the relevant assessment year unless there is a failure on the part of the assessee to disclose fully and truly all material facts. The court found that there was no such failure by the assessee and that the reassessment proceedings were barred by limitation.

Conclusion:
The court allowed the writ petition, quashing the impugned notice under section 148 dated September 19, 2003, and held that the initiation of reassessment proceedings was without jurisdiction and barred by limitation.

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