2002 (6) TMI 8 - HC - Income Tax

The notice, issued under section 148, seeking to reopen the assessment in respect of the assessment year 1995-96 is the subject-matter of challenge in this writ petition. - petitioner challenges the said notice on various grounds. The notice that has been issued is subject to a proviso to section 147 since issued four years after the end of the relevant assessment year and as such is incompetent and without jurisdiction. - In the result this writ petition succeeds and the proceeding cannot be proceeded with in respect of Rs. 1,78,15,909, the materials in respect of which were disclosed. But so far as the balance of Rs. 1,37,000 is concerned, the same can be proceeded with since there was failure to disclose materials on the part of the petitioner as is apparent from the records to assess the income in respect thereof. - The writ petition, therefore, succeeds in part

Issues Involved:
1. Validity of the notice issued under section 148 of the Income-tax Act, 1961.
2. Obtaining of sanction under section 151 before reopening.
3. Escaping of assessment.
4. Reopening of assessment after four years.
5. Failure to disclose fully and truly all material facts necessary for assessment.
6. Interpretation of fiscal statute.
7. Jurisdiction of the court to entertain the objections.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148:
The petitioner challenged the notice dated March 27, 2002, issued under section 148 of the Income-tax Act, 1961, to reopen the assessment for the assessment year 1995-96. The petitioner contended that the notice was incompetent and without jurisdiction as it was issued beyond the four-year limitation period specified in the proviso to section 147. The notice lacked the necessary conditions of "reasons to believe" and "failure to disclose fully and truly all material facts necessary for assessment."

2. Obtaining of Sanction Under Section 151 Before Reopening:
The petitioner argued that the notice was issued without the required sanction from the Deputy Commissioner under section 151. However, the court found that the Joint Commissioner had recorded satisfaction based on reasons provided by the Assessing Officer, thus fulfilling the requirement under section 151. The petitioner conceded this point during the proceedings.

3. Escaping of Assessment:
Section 147 empowers the Assessing Officer to assess or reassess income if there is reason to believe that income chargeable to tax has escaped assessment. In this case, the court found that the condition of income escaping assessment was fulfilled as the earlier assessment was made under section 143(3).

4. Reopening of Assessment After Four Years:
The assessment for the year 1995-96 was sought to be reopened by a notice issued on March 27, 2002, beyond the four-year limitation period. The proviso to section 147 prohibits reopening after four years unless there is a failure to submit a return or to disclose fully and truly all material facts necessary for assessment. The court found that the case did not fall under the first condition of non-submission of return or non-response to notice.

5. Failure to Disclose Fully and Truly All Material Facts Necessary for Assessment:
The court examined whether there was a failure to disclose fully and truly all material facts necessary for assessment. It was found that the assessee had disclosed details of payments in violation of section 40A(3) during the original assessment. The court noted that the Assessing Officer had considered these details but did not include them in the assessment order, possibly due to satisfaction with the explanations provided. Therefore, the court concluded that there was no failure to disclose fully and truly all material facts for the amount of Rs. 1,78,15,909. However, for the amount of Rs. 1,37,000, there was a failure to disclose material facts, making it liable for reopening.

6. Interpretation of Fiscal Statute:
The court emphasized the need for strict interpretation of fiscal statutes. The proviso to section 147 requires failure to disclose fully and truly all material facts for reopening an assessment after four years. The court found that the reasons recorded did not show any failure on the part of the assessee to disclose material facts, thus making the notice without jurisdiction.

7. Jurisdiction of the Court to Entertain the Objections:
The court held that it has the jurisdiction to examine whether the reasons for reopening an assessment are present, even if it cannot judge the sufficiency of those reasons. The absence of a reason indicating failure to disclose material facts rendered the notice invalid. The court rejected the respondents' contention that the objections should be decided by the Assessing Officer, as it involves questioning the validity of the sanction given by the Commissioner.

Conclusion:
The court allowed the writ petition in part, quashing the proceedings related to Rs. 1,78,15,909 due to the absence of failure to disclose material facts. However, it permitted the reopening of the assessment for Rs. 1,37,000, where there was a failure to disclose material facts. The court issued a writ of certiorari accordingly and disposed of the writ petition without costs.

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