2011 (3) TMI 559 - HC - Income Tax

Reassessment - notice issued under Section 148 beyond four year - As per the proviso to Section 147 of the Act, the assessment can be reopened beyond four years from the end of the relevant assessment year, only if there is failure on the part of the assessee to disclose fully and truly all material facts. In the present case, the assessment is sought to be reopened beyond the period of four years and there is no material on record to suggest that there was failure on the part of the assessee to disclose fully and truly all material facts - notice dated 29/2/2010 issued under Section 148 of the Income Tax Act, 1961 as well as the order dated 10/11/2010 rejecting the objections raised by the petitioner are quashed and set aside.

Summary

Issues:
1. Challenge to notice seeking to reopen assessment for assessment year 2003-04.
2. Rejection of objections raised for reopening of the assessment.

Detailed Analysis:
1. The petition was filed to challenge a notice dated 29/3/2010 seeking to reopen the assessment for the assessment year 2003-04 and the order dated 10/11/2010 rejecting the objections raised by the petitioner. The petitioner, a Limited company engaged in the business of manufacture and export of castor oil and derivatives, had claimed a deduction under Section 10B of the Income Tax Act, 1961. The assessing officer allowed the claim under Section 10B after detailed reasons were provided by the petitioner. However, the assessment was sought to be reopened based on the grounds that the petitioner did not achieve the required value addition of 82% as mandated by the licensing authority. The petitioner contended that the value addition had been achieved, and the method of computing value addition was faulty. Moreover, it was argued that beyond four years from the end of the relevant assessment year, the assessment could not be reopened without a failure to disclose all material facts.

2. The assessment was sought to be reopened beyond four years from the end of the relevant assessment year based on the presumption that the petitioner failed to achieve the required value addition. However, it was highlighted that there was no failure on the part of the petitioner to disclose all material facts. The proviso to Section 147 of the Act allows reopening of assessment beyond four years only in cases of failure to disclose material facts. Since there was no evidence of such failure, the notice seeking to reopen the assessment was deemed unsustainable. Consequently, the notice dated 29/2/2010 issued under Section 148 of the Income Tax Act, 1961, and the order dated 10/11/2010 rejecting the objections raised by the petitioner were quashed and set aside. The rule was made absolute with no order as to costs.