2003 (6) TMI 24 - HC - Income Tax

Notice issued under section 147 read with section 148 - challenge to the notices is mainly on the ground that these have been issued after the expiry of four years from the end of the relevant assessment year even though the conditions as contemplated under section 147 of the Act were not satisfied. - the impugned notices dated May 29 2001 issued under section 147 read with section 148 of the Act are without jurisdiction as the conditions precedent to reopen the assessment in terms of the proviso to section 147 are totally non-existent and therefore we allow the petition and quash the impugned notices.

Issues Involved:
1. Validity of notices issued under Section 147 read with Section 148 of the Income-tax Act, 1961.
2. Examination of conditions under Section 147 for reopening assessments after four years.
3. Alleged failure of the assessee to disclose fully and truly all material facts.
4. Jurisdiction of the Assessing Officer to issue notices for reassessment.
5. Relevance of Section 14A of the Income-tax Act in the context of reopening assessments.

Issue-Wise Detailed Analysis:

1. Validity of Notices Issued Under Section 147 Read with Section 148:
The petitioner challenged the notices dated May 29, 2001, issued under Section 147 read with Section 148 of the Income-tax Act for the assessment years 1991-92 to 1994-95. The primary ground for the challenge was that the notices were issued after the expiry of four years from the end of the relevant assessment year, and the conditions under Section 147 were not satisfied. The court noted that the notices were based on a mere change of opinion regarding the disallowance of a larger sum under the original assessment.

2. Examination of Conditions Under Section 147 for Reopening Assessments After Four Years:
Section 147 allows reopening of assessments if the Assessing Officer has reason to believe that income has escaped assessment. However, the proviso to Section 147 stipulates that no action can be taken after four years unless there is a failure on the part of the assessee to make a return or to disclose fully and truly all material facts. The court found that the petitioner had disclosed all material facts fully and truly, and the original assessments were made after considering these facts. Therefore, the conditions for reopening the assessments were not met.

3. Alleged Failure of the Assessee to Disclose Fully and Truly All Material Facts:
The petitioner argued that it had huge capital reserves and profits, and no part of borrowed funds was used for investments in tax-free bonds. The court observed that the assessment orders for the relevant years revealed that all material facts were disclosed, and the Assessing Officer had made disallowances based on these facts. The court found no evidence or allegation that the assessee failed to disclose fully and truly all material facts necessary for the assessments.

4. Jurisdiction of the Assessing Officer to Issue Notices for Reassessment:
The court examined whether the Assessing Officer had jurisdiction to issue the notices under Section 148. It was noted that the reasons for reopening the assessments did not allege any failure by the assessee to disclose material facts. The court held that the reasons given by the Assessing Officer did not satisfy the conditions under the proviso to Section 147, and thus, the notices were without jurisdiction.

5. Relevance of Section 14A of the Income-tax Act in the Context of Reopening Assessments:
The Assessing Officer also relied on Section 14A, which disallows expenditure incurred in relation to income not includible in total income. However, the court noted that the counter-affidavit stated that the reopening was not based on Section 14A. Therefore, the court did not find it necessary to discuss the import of Section 14A in detail.

Conclusion:
The court concluded that the impugned notices dated May 29, 2001, issued under Section 147 read with Section 148 of the Income-tax Act were without jurisdiction. The conditions precedent for reopening the assessments, as stipulated in the proviso to Section 147, were not satisfied. Consequently, the court allowed the petition and quashed the impugned notices.

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