2012 (3) TMI 334 - HC - Income Tax

Reopening - Time limitation - Moreover it was stated that the relevant records are inspected by the Excise authorities in the course of Excise audits and the percentage of melting loss will vary from factory to factory depending on the type and quality of raw material, machinery and process used - The jurisdictional condition is that in such case before an assessment can be validly reopened, there must be a failure on the part of the assessee to state fully and truly all the material facts necessary for the assessment - Assessing Officer could not have reopened the assessment on the basis of this subsequent decision of the Tribunal unless the jurisdictional requirements in the proviso to Section 147 were fulfilled - it is evident that the Assessing Officer has transgressed the limits on his jurisdiction for seeking to reopen an assessment beyond a period of four years from the end of the relevant assessment year - Decided in favor of the assessee

Summary

Issues:
Reopening of assessment beyond four years from the end of the relevant Assessment Year without failure to disclose material facts necessary for assessment.

Analysis:
The judgment pertains to the reopening of an assessment for AY 2004-05 by the Assessing Officer beyond the prescribed period of four years. The petitioner had claimed a melting loss of 7.24%, which was challenged by the Assessing Officer as being excessive compared to industry standards. The petitioner contended that the claimed loss was in line with audited accounts and statutory statements. The objections raised by the petitioner were rejected by the Assessing Officer, citing a decision of the Income-Tax Appellate Tribunal regarding allowable melting loss percentages. The petitioner argued that the reopening of the assessment was based on a change of opinion rather than a failure to disclose material facts necessary for assessment. The Revenue, on the other hand, implied that income had escaped assessment due to the higher melting loss claimed by the petitioner.

The judgment highlighted that for a valid reopening of assessment beyond four years, there must be a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. In this case, the reasons provided for reopening did not allege any such failure. The Assessing Officer's basis for reopening was solely the perceived high melting loss claimed by the petitioner, which was deemed a change of opinion rather than a valid reason for reassessment. The original assessment under Section 143(3) had accepted the melting loss without discussion, indicating that the claim was not questioned at that time. The judgment emphasized that the Assessing Officer exceeded jurisdiction by reopening the assessment based on a subsequent Tribunal decision without fulfilling the necessary jurisdictional requirements. The Court ultimately set aside the impugned notice, objection order, and assessment order, declaring the reopening of assessment beyond the prescribed period as invalid.

In conclusion, the judgment delves into the necessity of fulfilling jurisdictional conditions for validly reopening assessments beyond four years, emphasizing the requirement of a failure to disclose material facts. It highlights the distinction between a change of opinion and a valid reason for reassessment, ultimately ruling in favor of the petitioner due to the lack of substantiated grounds for the reassessment beyond the statutory limit.