2011 (3) TMI 1390 - HC - Income Tax

Reopening of assessment - notice has been issued after the expiry of a period of four years from the end of the relevant assessment year - according to the Assessing Officer the petitioner was not entitled to deduction under section 80IA on income which was not derived from industrial undertaking. - doctrine of merger - held that - it is apparent that the assessment order in respect of the items for which assessment is sought to be reopened has merged with the order of Tribunal and as such has no independent existence and therefore the assessment could not be reopened in respect of the said items. - it is an admitted position that the impugned notice has been issued after the expiry of a period of four years from the end of the relevant assessment year. A perusal of the reasons recorded shows that all that has been stated therein, is that income has escaped assessment due to failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. However, there is nothing to indicate as to what is the nature of the failure on the part of the petitioner. - Decided in favor of assessee.

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment.
2. Alleged failure of the petitioner to disclose fully and truly all material facts necessary for assessment.
3. Jurisdiction of the Assessing Officer to reopen the assessment beyond four years from the end of the relevant assessment year.

Issue-wise Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment:
The petitioner challenged the notice dated 30.03.2001 issued under Section 148 of the Income Tax Act, 1961, for reopening the assessment for the assessment year 1995-96. The petitioner argued that the notice was issued beyond the prescribed period of four years from the end of the relevant assessment year, and hence, it was invalid. The court found that the reopening of assessment was clearly beyond the period of four years, attracting the proviso to Section 147 of the Act. The court concluded that for the purpose of assuming valid jurisdiction under Section 147, the Assessing Officer needed to establish that income chargeable to tax had escaped assessment due to the failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment.

2. Alleged failure of the petitioner to disclose fully and truly all material facts necessary for assessment:
The respondent claimed that the petitioner had incorrectly claimed deductions under Sections 80I and 80IA on income not derived from industrial undertakings, including rent, export incentives, advance license benefits, interest income, and other miscellaneous receipts. The respondent argued that the petitioner had not disclosed the nature and details of these incomes, which were material facts for completing the assessment. However, the petitioner provided detailed statements bifurcating figures of Profit and Loss Account between eligible units and non-eligible units, showing that other income was not allocated to eligible units for deduction under Sections 80I and 80IA. The court found that the basic premise for reopening the assessment did not exist, as the petitioner had not claimed deductions on the alleged other income. Additionally, the Tribunal had accepted the petitioner's claim and working of deductions under Sections 80I and 80IA, and the issue had merged with the Tribunal's order.

3. Jurisdiction of the Assessing Officer to reopen the assessment beyond four years from the end of the relevant assessment year:
The court noted that the notice under Section 148 was issued after the expiry of four years from the end of the relevant assessment year. The reasons recorded for reopening the assessment merely stated that income had escaped assessment due to the petitioner's failure to disclose fully and truly all material facts, without specifying the nature of the failure. The court emphasized that mere making of a claim cannot be deemed as failure to disclose fully and truly all material facts as required under the proviso to Section 147. In the absence of any specific failure on the petitioner's part, the court concluded that the assumption of jurisdiction under Section 147 by the Assessing Officer was without jurisdiction.

Conclusion:
The court allowed the petition, quashing and setting aside the impugned notice dated 30.03.2001 issued under Section 148 of the Income Tax Act, 1961. The court ruled that the reopening of the assessment was invalid as it was beyond the prescribed period and there was no failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment. The rule was made absolute with no order as to costs.

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