2012 (9) TMI 609 - HC - Income Tax

Validity of notice issued u/s 148 on March 21, 2003, in respect of the AY 1996-97 which is beyond a period of four years from the end of the relevant AY, in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment - dis-allowance u/s 40(a)(ia) - payment of usance interest to nonresidents out of the boundaries of India on purchase of ships - Held that - A perusal of the reasons recorded shows that there is not even a whisper therein to the effect that there is any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration. Under the circumstances, the notice having been issued after the expiry of a period of four years from the end of the relevant assessment year, the assumption of jurisdiction u/s 147 by the Assessing Officer is without authority of law - Decided in favor of assessee

Summary

Issues:
Challenge to notice under section 148 of the Income-tax Act, 1961 for reopening assessment for the assessment year 1996-97.

Analysis:
The petitioner, a private limited company, challenged a notice issued by the respondent under section 148 of the Income-tax Act, 1961, seeking to reopen the assessment for the assessment year 1996-97. The petitioner had filed its return of income for the said year, which was selected for scrutiny assessment and resulted in a total income declaration of Rs. 22,53,340. Subsequent appeals against the assessment order were unsuccessful. The notice for reopening the assessment was issued on March 21, 2003, beyond the four-year period from the end of the relevant assessment year. The main ground for reopening the assessment was the alleged failure of the petitioner to deduct tax on usance interest paid to non-residents for the purchase of ships. The petitioner argued that the notice was invalid due to the absence of any failure to disclose material facts necessary for assessment. The respondent, however, opposed the petitioner's application, maintaining the validity of the notice.

The Assessing Officer, in this case, needed to establish that income had escaped assessment due to the petitioner's failure to disclose all material facts necessary for assessment to reopen the assessment beyond the four-year period. However, the reasons recorded for the reopening did not indicate any such failure on the part of the petitioner. As the notice was issued after the four-year period without meeting the necessary conditions for reopening, the assumption of jurisdiction under section 147 of the Act was deemed invalid. The court found that since there was no failure on the part of the petitioner to disclose material facts, the notice was without the authority of law. Consequently, the court allowed the petition, quashing and setting aside the impugned notice dated March 21, 2003, issued under section 148 of the Act for the assessment year 1996-97. The rule was made absolute with no order as to costs.