2011 (1) TMI 432 - HC - Income Tax

Reopening of the assessment - Bad debt written off - Income escaping assessment - The assessee-company has deliberately concealed the fact that Rs.94,41,540 was never offered as an income - In this case the provisions of section 147 are clearly applicable as there was failure on the part of the assessee-company to declare fully and truly all material facts necessary for its assessment for the assessment year 2004-05 - In the present case during the assessment proceedings the Assessing Officer enquired the very same issue and on being satisfied allowed the claim - Once it is held that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment, the impugned notice issued beyond the period of four years from the end of the relevant assessment year cannot be sustained - Accordingly the petition is allowed

Summary

Issues:
Challenge to notice under section 148 of the Income-tax Act, 1961 for reopening assessment year 2004-05.

Analysis:
The petition was filed to challenge a notice issued under section 148 of the Income-tax Act, 1961, seeking to reopen the assessment for the year 2004-05. The original assessment allowed a deduction of Rs. 94 lakhs claimed as bad debt under section 143(3) of the Act. The Assessing Officer sought to reopen the assessment by issuing a notice in 2009, questioning the bad debt deduction. However, no further action was taken on this notice. Subsequently, in 2010, another notice was issued on the same grounds, alleging that the assessee had concealed facts related to bad debt written off, leading to underassessment of income. The petitioner objected to the reopening, arguing that the issue had been addressed during the original assessment, and no new material facts were disclosed in the subsequent notice.

The main ground for reopening the assessment was the alleged concealment of facts related to bad debt deduction under section 36(1)(vii) of the Income-tax Act. The Assessing Officer contended that the assessee had not shown advances paid and expenses incurred as income, leading to underassessment. However, it was argued that during the original assessment, the issue of bad debt deduction was specifically raised, and after receiving explanations, the claim was allowed. Therefore, it was contended that there was no failure on the part of the assessee to disclose all material facts necessary for assessment, as the issue had been addressed previously.

The court considered previous decisions cited by the Revenue but found them irrelevant to the present case. It was noted that the specific issue of bad debt deduction had been raised and resolved during the original assessment, and there was no failure to disclose material facts. Therefore, the court held that the notice issued beyond the four-year period from the relevant assessment year was not sustainable. The petition was allowed, quashing the notice dated March 22, 2010 issued under section 148 of the Income-tax Act, 1961.