2011 (1) TMI 178 - HC - Income Tax

Under section 148 - the amount of income escaping assessment is less than or is likely to amount to less than one lakh rupees in no case notice can be issued beyond a period of four years from the end of the relevant assessment year - Thus section 149 of the Act merely prescribes the maximum time-limit for issuance of notice under section 148 of the Act based upon the amount involved - The said provision does not in any manner override the proviso to section 147 of the Act which lays down that no action shall be taken under section 147 after the expiry of four years from the end of the relevant assessment year unless the conditions stipulated thereunder are satisfied - The proviso to section 147 of the Act and sub-section (1) of section 149 operate in different fields and are independent from one another - Thus in a case where the requirements of the proviso to section 147 of the Act are not satisfied no notice under section 148 can be issued beyond a period of four years even if the amount of tax escaping assessment is more than or likely to be more than one lakh rupees whereas in a case where the amount of tax escaping assessment is not more than or not likely to be more than one lakh rupees even if the requirements of the proviso to section 147 of the Act are satisfied no notice can be issued beyond a period of four years - The time-limit of six years provided by the said section is the maximum time-limit for issuance of notice under section 148 of the Act beyond which even if the requirements of the proviso to section 147 of the Act are fulfilled no notice under section 148 can be issued. Held that the notice for reassessment has been issued after the expiry for a period of four years from the end of the relevant assessment year and as noted earlier there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration - In the circumstances the assumption of jurisdiction under section 147 of the Act by issuance of notice under section 148 of the Act is invalid and as such cannot be sustained Hence the petition succeeds and is accordingly allowed

Summary

Issues Involved:
1. Validity of notice issued under section 148 of the Income-tax Act, 1961 for reopening assessment.
2. Applicability of the proviso to section 147 of the Income-tax Act, 1961.
3. Interpretation of section 149(1)(b) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of notice issued under section 148 of the Income-tax Act, 1961 for reopening assessment:

The petitioner challenged the notice dated 24-3-2010 issued under section 148 for reopening the assessment for the year 2003-04, arguing that it was beyond the permissible period of four years from the end of the relevant assessment year. The petitioner contended that there was no failure on their part to disclose fully and truly all material facts necessary for the assessment. The court observed that the notice was issued after the expiry of four years and emphasized that the reasons recorded for reopening did not indicate any such failure by the petitioner. The court concluded that the reopening was based on a mere change of opinion by the successor Assessing Officer, which is not permissible under the law.

2. Applicability of the proviso to section 147 of the Income-tax Act, 1961:

The court examined whether the conditions stipulated under the proviso to section 147 were met. The proviso allows reopening beyond four years only if there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The court found that neither the reasons recorded for reopening nor the order rejecting the objections indicated any failure by the petitioner to disclose material facts. The court held that in the absence of such failure, the assumption of jurisdiction under section 147 was invalid.

3. Interpretation of section 149(1)(b) of the Income-tax Act, 1961:

The respondent argued that under section 149(1)(b), the assessment could be reopened within six years if the income escaping assessment was Rs. 1 lakh or more. The court clarified that section 149(1)(b) merely prescribes the maximum time limit for issuing a notice under section 148, based on the amount involved. The court emphasized that this provision does not override the proviso to section 147, which requires a failure to disclose material facts for reopening beyond four years. The court concluded that even if the income escaping assessment was more than Rs. 1 lakh, the requirements of the proviso to section 147 must still be satisfied for reopening beyond four years.

Conclusion:

The court allowed the petition, quashing the notice dated 24-3-2010 issued under section 148. It held that the reopening of the assessment was invalid as it was based on a mere change of opinion and did not meet the conditions stipulated under the proviso to section 147. The court clarified that section 149(1)(b) does not override the proviso to section 147, and the requirements of the proviso must be satisfied for reopening beyond four years.