2014 (11) TMI 892 - HC - Income Tax

Validity of notice for reopening of assessment u/s 148 Notice issued beyond the period of 4 years Failure on the part of assessee to fully and truly disclose all material facts necessary for assessment - Held that - Even according to the AO the assessee had furnished the details in support of its claim u/s 80IA of the Act and the same were subject of examination before passing assessment order dated 31 January 2003 u/s 143(3) of the Act - according to the AO himself there was due application of mind on the part of the AO while passing an order u/s 143(3) of the Act and seeking to reopen the assessment on the same facts would amount to change of opinion - the other condition precedent as found in the first proviso to Section 147 of the Act viz. failure to disclose truly and fully all material facts necessary for assessment is not satisfied as it is clear by virtue of letter dated 6 August 2007 in which the reasons which were communicated specifically refer to the material having been furnished and examined by the AO while passing the assessment order in regular proceedings it could not be understood as to on what basis the AO states that whenever a notice beyond the period of 4 years from the end of the relevant AY is issued, it is implicit in such a notice that there was failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment - it requires application of mind by the AO before he issues notice for reopening the assessment which is done after recording his reasons. It is the reasons which indicate not only the application of mind but also the basis for issuing the notice - It is on the basis of recorded reasons that the objections to the same are filed and in the absence of it being recorded it would be impossible for the assessee to object to it - Besides not furnishing explicit reasons would enable addition to reasons recorded on the ground that it is implicit in the reasons recorded - Revenue officers would do well to always remember that reopening of an assessment cannot be done in such casual manner - A reopening notice carries grave consequence for the assessee of subjecting him to reassessment proceeding and also leading to uncertainty in respect of the completed assessments thus, the notice issued u/s 148 is to be set aside Decided in favour of assessee.

Summary

Issues:
Challenging separate notices under Section 148 of the Income Tax Act for reopening assessments for Assessment Year 2000-01 and 2001-02 due to failure to fully disclose material facts necessary for assessment.

Analysis:
1. The petitions challenge notices issued beyond 4 years from the end of the relevant assessment year, requiring failure to fully disclose material facts for reopening. The law mandates full disclosure before reopening assessments.

2. The petitioner filed its revised return for Assessment Year 2000-01, claiming deductions under Section 80IA, duly supported by a certified computation. The Assessing Officer raised queries during scrutiny, and after submission of detailed facts, passed an assessment order.

3. The impugned notice for reopening the assessment cited disproportionate allocation of expenses between eligible and non-eligible units for deduction under Section 80IA, leading to inflated profits. The petitioner objected, highlighting full disclosure during regular assessment proceedings.

4. The Assessing Officer rejected the objection, stating that issuance of notice beyond 4 years implies failure to disclose necessary facts. Similar facts were observed in the petition relating to Assessment Year 2001-02.

5. Section 147 requires the Assessing Officer to have a reason to believe that income has escaped assessment due to failure to disclose all material facts. In this case, the petitioner had furnished details supporting the claim under Section 80IA during regular assessment proceedings.

6. The Assessing Officer's assertion of implicit failure to disclose in notices issued beyond 4 years is unfounded. Reopening assessments requires explicit reasons to ensure fairness and prevent arbitrary actions, safeguarding the assessee's rights.

7. The Court quashed the impugned notices for both assessment years, emphasizing the importance of explicit reasons for reopening assessments to protect the assessee's interests and prevent arbitrary actions.

8. The petitions were allowed with no order as to costs, ensuring adherence to legal requirements and procedural fairness in assessment proceedings.