2013 (1) TMI 824 - HC - Income Tax

Summary

Issues Involved:
1. Legality of the notice issued u/s 148 of the Income Tax Act, 1961.
2. Validity of the reasons for reopening the assessment.
3. Jurisdiction of the Assessing Officer to make income additions.
4. Whether there was a failure to disclose material facts by the assessee.
5. Whether the reopening of the assessment was based on tangible material.

Summary:

1. Legality of the notice issued u/s 148 of the Income Tax Act, 1961:
The Petitioner challenged the legality of a notice dated 24 March 2011 issued by the Assessing Officer u/s 148, seeking to reopen an assessment for A.Y. 2006-07. The reopening occurred within four years of the end of the relevant assessment year.

2. Validity of the reasons for reopening the assessment:
The reasons for reopening included:
- Unapportioned claim recovery of Rs. 27.24 crores not offered to tax.
- Change in accounting policy reducing income by Rs. 20 crores.
- Liability of Rs. 6.57 crores for revised pay scales not crystallized before the balance-sheet date.
- ISO Certification/Audit fees of Rs. 16.29 lakhs treated as revenue expenses instead of capital expenses.
- Prior period expenses of Rs. 1.73 crores not related to the relevant previous year.

3. Jurisdiction of the Assessing Officer to make income additions:
The Petitioner argued that the Assessing Officer had no jurisdiction to make income additions u/s 44 read with Rule 5(a). The Revenue contended that the reopening was within jurisdiction as it was based on tangible material and not a mere change of opinion.

4. Whether there was a failure to disclose material facts by the assessee:
The Petitioner claimed complete disclosure of material facts during the original assessment, while the Revenue argued that the Assessing Officer failed to apply his mind to the relevant points during the original assessment proceedings.

5. Whether the reopening of the assessment was based on tangible material:
The Court held that the reopening within four years required tangible material, not a mere change of opinion. The Assessing Officer had tangible material to believe that income had escaped assessment, fulfilling the jurisdictional requirement of Section 147.

Conclusion:
The Court dismissed the Petition, stating that the Assessing Officer acted within jurisdiction in reopening the assessment. The merits of the assessment would be considered by the Assessing Officer upon reopening. No case for interference under Article 226 of the Constitution was made out.