2013 (7) TMI 479 - HC - Income Tax

Reopening of assessment - whether it was permissible for the AO to reopen the assessment on the same grounds on which the assessment was reopened earlier and was quashed by the Commissioner (Appeals) in the assessee s appeal the order passed by the Commissioner (Appeals) it is apparent that the earlier assessment was set aside on the ground that the AO had not recorded reasons for reopening the assessment which is a condition precedent for issuing notice u/s 148(2) thus proceedings initiated earlier had been set aside on the ground that the same were initiated without compliance with the mandatory provisions of section 148(2) when earlier order stood annulled on the ground of lack of fulfilment of the basic requirement for exercise of jurisdiction under section 147 - there is no bar against reopening the assessment once again on the same grounds after following due procedure in accordance with law. Limitation on reopening of assessment - whether the reopening of assessment beyond a period of four years from the end of the relevant assessment year is valid the AO has recorded twin satisfaction as required under the proviso to section 147 - the fact that such income has escaped assessment because the assessee had suppressed the closing stock escapement is by reason of failure on the part of the assesee to disclose fully and truly all material facts necessary for its assessment - when there is suppression it goes without saying that there is failure to disclose fully and truly all material facts even if the same is not expressly stated in such terms - no infirmity in the action of the revenue in reopening the assessee s assessment for the assessment year under consideration by issuance of notice u/s 148 petition decided against assessee.

Issues:
1. Validity of notice issued under section 148 of the Income-tax Act, 1961 for reopening assessment year 1994-95.
2. Permissibility of reopening assessment on same grounds after earlier assessment was set aside.
3. Validity of reopening assessment beyond four years from the end of the relevant assessment year.

Issue 1: Validity of notice under section 148:
The petitioner challenged a notice issued under section 148 of the Income-tax Act for reopening the assessment year 1994-95. The petitioner contended that the original assessment was already finalized after detailed scrutiny under section 143(3) of the Act. The petitioner argued that despite providing all necessary details during the assessment proceedings, a reassessment was conducted under section 143(3) read with section 147 of the Act. The petitioner objected to the reopening of the assessment, stating that the notice under section 148 was issued beyond the permissible four-year period from the end of the relevant assessment year. The petitioner emphasized that there was no failure on their part to disclose material facts. However, the respondent argued that the reassessment was valid as income had escaped assessment due to the petitioner's failure to disclose fully and truly all material facts. The court analyzed the reasons recorded for reopening the assessment, which included discrepancies in the valuation of closing stock and suppression of certain assets leading to income escaping assessment. The court concluded that the notice under section 148 was valid, and the petition challenging the notice was dismissed.

Issue 2: Permissibility of reopening assessment on same grounds:
The next issue was whether it was permissible to reopen the assessment on the same grounds after an earlier assessment was set aside. The court noted that the earlier assessment was annulled due to the Assessing Officer's failure to record reasons for reopening, which is a prerequisite for issuing a notice under section 148(2) of the Act. The court determined that since the earlier order was annulled due to non-compliance with the mandatory provisions, there was no bar against reopening the assessment on the same grounds following due procedure. The court emphasized that if the reassessment was valid on one ground, it would be sustainable. Therefore, the court held that it was permissible to reopen the assessment on the same grounds after the earlier assessment was set aside.

Issue 3: Validity of reopening assessment beyond four years:
The final issue involved the validity of reopening the assessment beyond four years from the end of the relevant assessment year. The court referred to the proviso to section 147 of the Act, which requires the Assessing Officer to have twin satisfaction for reopening an assessment after the four-year period. The court examined the reasons recorded for reopening, which highlighted discrepancies in the valuation of assets and suppression of certain stock items leading to income escaping assessment. The court concluded that the twin satisfaction required under the proviso to section 147 was met in this case, as income had indeed escaped assessment due to the petitioner's failure to disclose material facts fully and truly. Therefore, the court found that the reopening of the assessment beyond the four-year period was valid. Consequently, the petition was dismissed, and the interim relief granted earlier was vacated.

This detailed analysis of the judgment from the Gujarat High Court addresses the validity of the notice under section 148, the permissibility of reopening the assessment on the same grounds, and the validity of reopening the assessment beyond the four-year period from the end of the relevant assessment year.

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