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Issues involved:
The judgment deals with the initiation of proceedings for reopening assessment for the assessment years 1984-85 and 1985-86 by issuing notices under section 148 in March 1991, and the contention of whether the proceedings were initiated within the prescribed period under the Act. Initiation of Proceedings for Reopening Assessment: The principal contention raised in the cases was whether the proceedings for reopening assessment for the assessment years 1984-85 and 1985-86 were initiated within the statutory period. The petitioners argued that since there was no failure on their part to make a return or disclose all material facts necessary for assessment, the reassessment proceedings could not have been initiated after the expiry of four years from the end of the relevant assessment year. Reasons for Reopening Assessment: The reasons recorded by the Assessing Officer for reopening the assessment highlighted the belief that income had escaped assessment due to the assessee's unsustainable claim of deduction, which was not part of the audited profit and loss account. The Assessing Officer's belief was based on the non-exercise of due diligence in allowing the deduction, leading to the escapement of income from tax. Failure to Disclose Material Facts: The Assessing Officer's reasons for reopening the assessment did not attribute any failure on the part of the assessee to disclose all material facts necessary for assessment. The facts presented in the petition indicated that the assessee had made a claim for deduction, which was accepted after due consideration and reply to the query raised by the Assessing Officer. There was no indication of any failure on the part of the assessee to disclose material facts relevant to the assessment. Applicability of Proviso to Section 147: The proviso to section 147 was cited, stating that no action shall be taken after four years from the end of the relevant assessment year unless income has escaped assessment due to the assessee's failure to make a return or disclose material facts. The court concluded that the notices issued after the expiry of four years from the relevant assessment years were beyond the prescribed period, and the Assessing Officer lacked jurisdiction to issue notices under section 147 after the specified dates. Conclusion: The court found that the initiation of action under section 147 in each case was time-barred, and accordingly, the petitions succeeded. The notices under section 148 read with section 147 were quashed, and the rule was made absolute with no order as to costs.
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