2014 (10) TMI 547 - HC - Income Tax

Validity of notice u/s 148 Failure to disclose material facts or not - Notice issued after four year - Held that - The issuance of notice u/s 148 of the Act is beyond the period of four years from the end of the relevant AY 2006-2007 - while the AO mentioned that income had escaped assessment because of the failure on the part of the assessee to fully and truly disclose the material facts for assessment, he has not indicated as to which material fact had not been fully and truly disclosed by the assessee following the decision in M/s Swarovski India Pvt. Ltd. vs. Deputy Commissioner of Income Tax 2014 (9) TMI 4 - DELHI HIGH COURT wherein the notice u/s 148 of the Act was quashed for being issued after the expiry of 4 years from the relevant AY wherein there was no specific mention of which material facts were not disclosed by the assessee in the course of its original assessment proceedings u/s 143(3) of the Act - there exist no grounds for re-opening the assessment after the expiry of 4 years from the relevant AY - The notice u/s 148 of the Act is based on re-appreciation of the same material on record revenue has not specifically indicated as to which material facts were not disclosed by the assessee in the course of the assessment proceedings under the Act thus, the notice dated 28.03.2013 issued by the revenue u/s 148 of the Act is liable to be quashed Decided in favour of assessee.

Summary

Issues:
1. Validity of notice issued under Section 148 of the Income Tax Act, 1961 for reopening assessment beyond the four-year period.

Analysis:
The petitioner sought a writ of certiorari to quash a notice issued by the Deputy Commissioner of Income Tax under Section 148 of the Income Tax Act. The petitioner had filed its return for the assessment year 2006-2007, which was selected for scrutiny assessment. The assessing officer issued a detailed questionnaire raising queries on various points related to loans, advances, and interest payments. The petitioner responded to the queries, providing details of loans, advances, and interest-free transactions with group companies. Subsequently, the assessment order was issued, determining the total income. However, the assessing officer later issued a notice for reopening the assessment, citing that income had escaped assessment due to interest-free loans given by the petitioner. The petitioner objected to the reopening, arguing that no fresh material had emerged, and all relevant facts were disclosed during the original assessment.

The key contention was whether the notice issued under Section 148 was valid beyond the four-year period from the relevant assessment year. The assessing officer's reasons for reopening the assessment highlighted the alleged escapement of income due to interest-free loans provided by the petitioner. However, the petitioner argued that there was no failure to disclose material facts during the original assessment. The court referred to previous judgments emphasizing that for reopening assessments beyond the four-year period, there must be a failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. The court noted that the reasons provided by the assessing officer did not specify any undisclosed material facts by the petitioner during the original assessment.

Relying on precedents, the court held that the notice issued under Section 148 was liable to be quashed as it was based on a re-evaluation of the same material without any specific indication of undisclosed material facts. Consequently, the court allowed the writ petition, quashed the notice dated 28.03.2013, and disposed of all related proceedings without costs.