2014 (3) TMI 650 - HC - Income Tax

Validity of notice u/s 148 of the Act Reopening of assessment Proper disclosure of material facts - Held that - The notice dated 30 March 2013 has been issued beyond the period of 4 years from the end of the relevant assessment year 2006-07 - The jurisdictional requirement in such a case as provided under first proviso to Section 147 of the Act is that there must be failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment - the assessment for assessment year 2006-07 is sought to be reopened on the basis of the material which is already on record - there is no averment also in the reasons for reopening the assessment that there has been any failure on the part of the petitioner to truly and fully disclose all material facts necessary for assessment - the jurisdictional requirement for issuing a notice under Section 148 of the Act beyond the period of 4 years from the end of the relevant assessment year is not satisfied - the assessee has disclosed fully and truly all material facts necessary for assessment thus, the notice u/s 148 of the Act as well as order set aside Decided in favour of Assessee.

Issues:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961 for reopening the assessment for assessment year 2006-07.
2. Compliance with the jurisdictional requirement of failure to disclose fully and truly all material facts necessary for assessment.
3. Allegation of a mere change of opinion in respect of the assessment done under Section 143(3) of the Act.

Analysis:

Issue 1 - Validity of the notice under Section 148:
The petitioner challenged the notice dated 30 March 2013 issued by the Assessing Officer under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for assessment year 2006-07. The Assessing Officer had passed the original assessment order on 28 November 2008. The reasons for reopening the assessment included discrepancies in the treatment of income from trading in shares and securities, leading to an alleged escape of income chargeable to tax. The petitioner objected to the notice on various grounds, including the timing of issuance beyond the 4-year period from the end of the relevant assessment year.

Issue 2 - Compliance with jurisdictional requirement:
The petitioner contended that there was no failure on their part to disclose all material facts necessary for assessment during the original proceedings. The Assessing Officer's reasons for reopening the assessment were based on information already on record, indicating no new undisclosed material. The petitioner argued that the jurisdictional requirement under the first proviso to Section 147, necessitating a failure to disclose fully and truly all material facts, was not met in this case. The rejection of the petitioner's objections by the Assessing Officer was based on the assertion that income chargeable to tax had escaped assessment, justifying the reopening.

Issue 3 - Allegation of change of opinion:
The petitioner further contended that the reasons for reopening the assessment reflected a mere change of opinion, as the original assessment order did not address the specific issue of taxing profit on the sale of shares. The Assessing Officer maintained that there was no change of opinion as the issue had not been dealt with in the original assessment. The petitioner argued that all relevant issues were present during the initial assessment proceedings, and the notice under Section 148 was unjustified.

In the final judgment, the High Court set aside the notice dated 30 March 2013 and the order rejecting the petitioner's objections, ruling them unsustainable in law. The court emphasized that the petitioner had fully and truly disclosed all material facts necessary for assessment during the original proceedings, rendering the notice and subsequent rejection of objections invalid. The petition was allowed with no order as to costs, concluding the legal proceedings in favor of the petitioner.

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