2003 (4) TMI 90 - HC - Income Tax

Reopening of assessment limitation - The moot question we are required to consider is the validity and legality of the notices, all dated July 29, 1994, issued by the respondent-Income-tax Department under section 148 of the Income-tax Act, 1961, for reopening the respective assessment under section 147 - Pursuant to an interim order passed in the writ petition, the assessment orders have since been made. Since we have quashed the notices, the assessment orders made pursuant to such notices respectively in the respective cases cannot be sustained and accordingly stand quashed.

Issues Involved:
1. Validity and legality of the notices issued under section 148 of the Income-tax Act, 1961.
2. Application of the four-year limitation period for reopening assessments under section 147.
3. Application of amended vs. unamended provisions of section 147 and related sections.
4. Conditions under which the assessment can be reopened after the expiry of four years.
5. Jurisdiction and authority to issue notices under section 148.

Issue-wise Detailed Analysis:

1. Validity and Legality of Notices Issued Under Section 148:

The primary question was the validity and legality of the notices dated July 29, 1994, issued by the Income-tax Department under section 148 for reopening assessments for the years 1984-85 to 1989-90 and 1985-86 to 1989-90. The court examined whether these notices were justified under the provisions of section 147, both before and after the amendment effective April 1, 1989.

2. Application of the Four-Year Limitation Period for Reopening Assessments:

Dr. Pal argued that there was a four-year embargo on reopening assessments under clause (b) of section 147 as it stood before April 1, 1989, and this limitation continued under the amended provisions. He contended that the notices should be quashed as they were issued after the expiry of this period. The court agreed, stating that the four-year limitation is a mandatory restriction unless the assessee had defaulted in specific ways, which was not the case here.

3. Application of Amended vs. Unamended Provisions of Section 147 and Related Sections:

The court analyzed whether the amended or unamended provisions of section 147 should apply. It concluded that the amended provisions, effective from April 1, 1989, would govern the case since the notices were issued in 1994. However, it noted that there was no substantial change in the principle governing the reopening of assessments between the two versions of the law.

4. Conditions Under Which the Assessment Can Be Reopened After the Expiry of Four Years:

The court emphasized that under both the amended and unamended provisions, reopening of assessments after four years is only permissible if the assessee had failed to disclose fully and truly all material facts necessary for the assessment. In this case, the court found no such failure on the part of the assessees, as the reopening was based solely on a Supreme Court decision (N.C. Budharaja and Co.'s case) that constituted new information but did not indicate any default by the assessees.

5. Jurisdiction and Authority to Issue Notices Under Section 148:

The court examined whether the Assessing Officer had the jurisdiction to issue the notices under section 148. It concluded that the jurisdiction to issue such notices was not validly assumed, as the four-year limitation period had expired without any default on the part of the assessees. The court also noted that the procedural requirements, such as recording reasons before issuing notices, were not sufficient to override the statutory limitation.

Conclusion:

The court allowed the appeals, set aside the judgments of the learned single judge, and quashed the notices dated July 29, 1994, issued to the assessees for the relevant assessment years. It held that the notices were issued after the expiry of four years without any default by the assessees, making them invalid. Consequently, the assessment orders made pursuant to these notices were also quashed. The court issued a writ of certiorari accordingly and ruled that there would be no order as to costs.

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