2014 (5) TMI 13 - HC - Income Tax

Validity of order u/s 148 of the Act Disclosure of material facts - Held that - Neither the notice u/s 148 nor the reasons contain even a whisper to the effect that the assessee had failed to disclose fully and truly all material facts necessary in the assessment of AY 2004-2005 also, the proposal to reopen is beyond the period of four years Decided in favour of Assessee.

Summary

Issues:
Challenge to notice under section 148 of the Income Tax Act, 1961 and rejection of objections filed thereto.

Analysis:
The petitioner challenged a notice dated 17.03.2011 issued under section 148 of the Income Tax Act, 1961, and the subsequent order rejecting the objections filed. The petitioner had filed a return of income for the assessment year 2004-2005, indicating long term capital gain from transferring shares and mutual funds to a partnership firm for Re.1/-. The Assessing Officer requested details and evidence related to the capital gain, which the petitioner provided. The enclosures clearly showed the computation of gain/loss at Re.1/-, including the purchase value of shares. Notably, the impugned notice and reasons did not mention any failure to disclose material facts for the assessment year in question, which is crucial for reopening beyond the four-year period. The reasons provided by the respondent were deemed insufficient by the court, merely referring to the legal position perceived by the respondent.

The court did not agree with the respondent's contentions and found the reasons inadequate. Consequently, the court did not delve into the merits of the case but ruled in favor of the petitioner. The petitioner's counsel argued that the department's stance was unsustainable under section 45(3) of the Income Tax Act. Ultimately, the court made the rule absolute in favor of the petitioner, without any order as to costs.