2013 (2) TMI 406 - HC - Income Tax

Re opening of assessment - assessee has received the benefit from the scheme of amalgamation, the same would be offered for tax as business Income - Held that - The purported reasons for reopening do not even allege that there has been a failure on the part of the assessee to disclose any material fact. In fact, even in the impugned order dated 31.05.2012 there is no mention of what fact the assessee had failed to disclose which was necessary for the assessment in the original round of assessment. Failure to disclose all material facts necessary for assessment is a condition precedent for reopening of an assessment beyond the period of four years from the date of assessment. This is a pre-condition set out in the statute itself. This pre-condition has not been satisfied the impugned notice ought to be set-aside - in favour of assessee.

Summary

Issues:
1. Reopening of assessment under section 148 of the Income Tax Act, 1961 for the assessment year 2005-06.
2. Failure to disclose material facts necessary for assessment.
3. Validity of notice u/s 148 and rejection of objections.

Analysis:

1. The judgment pertains to a writ petition challenging the notice issued under section 148 of the Income Tax Act, 1961 for reopening the assessment for the assessment year 2005-06. The petitioner contended that the assessing officer failed to demonstrate any failure on their part to disclose material facts necessary for assessment, a prerequisite for reopening assessments beyond four years from the original assessment. The purported reasons for reopening did not allege any such failure on the part of the assessee. The court emphasized that failure to disclose all material facts necessary for assessment is a statutory precondition for reopening assessments after the specified period.

2. The petitioner had submitted objections to the notice, citing the first proviso to section 147 of the Act, which requires the assessing officer to establish a failure on the part of the assessee to disclose necessary facts for assessment. Despite this contention, the assessing officer rejected the objections merely stating that the assessee had not fully and truly disclosed its income, leading to under-assessment. The court noted that the assessing officer did not specify any undisclosed material fact crucial for the original assessment, as required by law for reopening assessments after the prescribed period.

3. Consequently, the court held that since the assessing officer failed to satisfy the precondition of demonstrating a failure to disclose material facts necessary for assessment, the notice issued under section 148 and the subsequent order rejecting objections were set aside. The court quashed all proceedings related to the notice dated 27.03.2012, allowing the writ petition and disposing of all pending applications. No costs were awarded in the matter, and the petitioner's objections were upheld based on the legal requirement of full and true disclosure of material facts for assessment under the Income Tax Act.

This detailed analysis of the judgment highlights the key legal issues involved in the case, focusing on the statutory requirements for reopening assessments and the court's decision based on the failure to meet those requirements.