2016 (8) TMI 1323 - HC - Income Tax

Reopening of assessment - Held that - The Learned Single Judge in the order under appeal observed that on factual aspects the reply submitted by the Revenue was vague and evasive. There was no reason to hold that the Appellant had not disclosed fully and truly all material facts in the earlier assessment. Apparently the learned Single Judge was not satisfied that the order for re-assessment was sustainable and yet dismissed the writ petition only on the ground for availability of alternative remedy by way of first appeal and second appeal under the Act against any fresh orders passed in re-assessment. The order under appeal dated 15th February 2016 declining interference with the notice for re-assessment on the ground of availability of alternative remedy only is, therefore, held to be not sustainable. The notice for re-assessment is therefore set aside.

Summary

Issues:
- Dismissal of S.B. Civil Writ Petition No.4531/2015 challenging notice under Section 148 of the Income-tax Act, 1961 for fresh assessment for Assessment Year 2008-09.
- Jurisdiction of Assessing Officer to order re-assessment based on reasons to believe that income had escaped assessment due to failure of assessee to disclose true and material facts.
- Maintainability of writ petition against a show cause notice when alternative statutory remedy is available.
- Interpretation of conditions precedent for issuing notice for assessment or re-assessment beyond the statutory period under Section 34 of the Income-tax Act, 1922.

Analysis:
The High Court considered an appeal arising from the dismissal of a writ petition challenging a notice for fresh assessment under Section 148 of the Income-tax Act, 1961 for Assessment Year 2008-09. The appellant contended that the re-assessment lacked fresh material or failure to disclose true facts, rendering it unsustainable. The Court emphasized that re-assessment requires the Assessing Officer to have valid reasons to believe income escaped assessment due to non-disclosure of material facts by the assessee.

The Court discussed the jurisdictional aspect of re-assessment under Section 147, emphasizing the necessity of new information or material not previously disclosed. Mere repetition of statutory language in the notice is insufficient to establish jurisdiction. The Court cited legal precedents to highlight the duty of the assessee to fully and truly disclose all primary facts, and the Assessing Authority's need for reasonable grounds to suspect under-assessment.

Regarding the maintainability of a writ petition against a show cause notice, the Court acknowledged that while alternative statutory remedies exist, a writ may be permissible if the notice is illegal on its face. The Court referenced case law to illustrate the conditions precedent for issuing notices beyond the statutory period, emphasizing the importance of genuine belief based on reasonable grounds.

In the specific case, the Court found flaws in the re-assessment process, noting vague replies and lack of fresh material to justify reopening the assessment. The Court held that the order dismissing the writ petition solely based on the availability of alternative remedies was unsustainable. Consequently, the notice for re-assessment was set aside, and the appeal was allowed, emphasizing the importance of valid reasons and material for re-assessment under the Income-tax Act.