2012 (5) TMI 337 - HC - Income Tax

Reassessment - notice u/s 148 - ceased liability - deemed income u/s 41(1) - held that - it can be easily seen that both the issues were within the knowledge of the Assessing Officer while original assessment was being framed. Not only that the assessee had disclosed all facts pertaining to these issue but had made further clarifications in response to the queries raised by the Assessing Officer. Thus, it cannot be said that there was failure on the part of the assessee to truly and fully disclose all material facts. In the present case, therefore, when the assessment is sought to be reopened beyond the period of four years from the end of the relevant assessment year, the same would not be permissible.

Summary

Issues: Validity of reopening assessment beyond four years from the end of relevant assessment year, Failure to disclose material facts.

In this case, the petitioner, a company registered under the Companies Act, challenged a notice issued by the Assistant Commissioner of Income Tax seeking to reopen the assessment for the year 2004-05. The original assessment for that year was finalized on 30th April 2010, determining the total income of the assessee. The Assessing Officer issued the notice for reopening the assessment on 23rd March 2011, citing that income chargeable to tax had escaped assessment due to alleged discrepancies in the treatment of custom duty and outstanding sales commission liability. The petitioner contended that the assessment could not be reopened beyond four years from the end of the relevant assessment year and that there was no failure on their part to disclose all material facts. The Assessing Officer's reasons for reopening the assessment were based on the alleged non-disclosure of custom duty payments and the treatment of old sales commission liabilities. The petitioner had provided explanations during the original assessment proceedings regarding these issues, which were not considered by the Assessing Officer at that time. The court observed that the petitioner had disclosed all relevant facts and provided clarifications during the original assessment, indicating no failure on their part to fully and truly disclose material facts. Consequently, the court allowed the petition, quashed the notice dated 23rd March 2011, and made the rule absolute accordingly.