2003 (12) TMI 31 - HC - Income Tax

Notice u/s 148 to reopen the assessment limitation - reason for reopening of the assessment is the net profit at 17 per cent, of the total costs adopted by the Assessing Officer for the assessment year 2000-01 - Nowhere in the reasons recorded by the Assessing Officer, is it stated that there is a failure on the part of the assessee to disclose material facts in the return filed - In the absence of any failure on the part of the assessee to disclose fully and truly all material facts, the reopening of the assessment beyond the period of four years is not sustainable

Summary

Issues:
Challenge to notices issued under section 148 of the Income-tax Act, 1961 for assessment years 1996-97 and 1997-98.

Analysis:
The petitioner, engaged in manufacturing abrasives, claimed relief under sections 80-I and 80-IA of the Income-tax Act, 1961 in their returns for the relevant assessment years. The Assessing Officer issued notices under section 143(2) seeking further particulars regarding the claim. The petitioner explained the market value calculation of bonds manufactured in their plant, based on export and import prices. The Assessing Officer, satisfied with the explanation, granted relief under section 80-IA. However, after four years, notices were issued under section 148 to reopen the assessment for the said years, prompting the petitioner's challenge. The petitioner argued that without a failure to disclose material facts, reopening after four years is not valid, citing relevant case law. The Revenue contended that the assessment was reopened due to undisclosed material facts, justifying the action.

During the proceedings, the Revenue's counsel raised a preliminary objection regarding the maintainability of the petition, citing the obligation for the assessee to raise objections before filing a writ petition. The court clarified that the apex court's decision does not preclude entertaining writ petitions against notices under section 148. The court then analyzed the reasons recorded for reopening the assessment, noting that the sole reason was the net profit percentage adopted by the Assessing Officer for a different year. It was observed that there was no mention of a failure to disclose material facts by the assessee in the reasons for reopening. Referring to previous judgments, the court held that reopening after four years requires a failure on the part of the assessee to disclose all material facts. As no such failure was evident, the court concluded that the reopening of assessment beyond four years was unsustainable.

In light of the analysis, the court ruled in favor of the petitioner, quashing the impugned notices. The court made the rule absolute in favor of the petitioner, with no order as to costs.