2015 (8) TMI 275 - HC - Income Tax

Validity of reopening of assessment - petitioner contend that after four years of the assessment year 2007-08 the second respondent issued notice dated 26.03.2014 under Section 148 seeking to reopen the assessment without any tangible materials and without assigning reasons - assessee had not furnished the true information regarding its status and the details regarding payment of dividend and not disclosed full and true material facts on the claim of deduction under Section 10B - Held that - It is not in dispute that the scrutiny assessment under Section 143(3) was completed on 16.12.2010 and the time limit of four years to invoke Section 147 of the Act is till 31.03.2014. It is not in dispute that the impugned notice under Section 148 has been issued on 26.3.2014 by the second respondent proposing to reassess the income for the assessment year 2007-08 since he had reason to believe that the income chargeable to tax for the said assessment year has escaped assessment within the meaning of Section 147 of the Act. Therefore when it is clear that the reassessment resorted to by the second respondent is within the period of four years Of-course it is true that no fresh material was available with the second respondent to proceed with the reassessment proceedings. However it is to be noted that the second respondent had categorically mentioned the reasons as stated supra by which he had a reason to believe that the income chargeable to tax has escaped assessment inasmuch as the specific case of the Revenue is that the petitioner has not disclosed fully truly all necessary material to enable the department to assess the income correctly regarding the particulars viz. the petitioner company is not a domestic company tax rate applicability on dividend distributor expenses incurred out of EEFC Fund and Board of approval to claim deduction under Section 10B. Therefore there is a failure on the part of the petitioner to disclose the above material facts and in such circumstances the Assessing Officer has rightly initiated the reassessment proceedings on the basis of available material on record which was specific relevant and considerable and after recording the reasons for his own belief that in the original assessment proceedings the petitioner/assessee had not disclosed the material facts truly and fully and therefore income chargeable to tax had escaped assessment. In my opinion he therefore correctly invoked the provisions of Sections 147 and 148 of the Act. Having carefully examined the reasons given by the Assessing Officer for re-opening the assessment in the present case this Court is of the view that the said reasons are relevant and material and have a bearing on the matters in regard to which the Assessing Officer has formed a reason to believe that the income chargeable to tax has escaped assessment and there is absolutely rational and intelligible nexus between the reasons and the belief entertained by the Assessing Officer. In the present case though the petitioner has given explanation elaborately in regard to the reasons relied on by the Assessing Officer for reopening the assessment and demonstrated the circumstances under which there was no income chargeable to tax has escaped assessment this Court is not supposed to decide the same since the issue involved in this Writ Petition is whether the Assessing Officer was right in reopening the assessment. To this extent this Court has answered accordingly. - Decided against assessee.

Issues Involved:
1. Validity of the Notice Issued under Section 148 of the Income Tax Act, 1961.
2. Failure to Obtain Approval from the Chief Commissioner or Commissioner under Section 151 of the Act.
3. Alleged Non-Disclosure of Material Facts by the Petitioner.
4. Applicability of the Concept of "Change of Opinion."
5. Time Limit for Issuance of Notice under Section 148 of the Act.
6. Jurisdiction of the Assessing Officer to Reopen the Assessment.

Detailed Analysis:

1. Validity of the Notice Issued under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice issued under Section 148 of the Act, which proposed to reassess the income for the assessment year 2007-08. The notice was issued on the grounds that the income chargeable to tax had escaped assessment. The court examined whether there were tangible materials on record for the Assessing Officer to form the requisite belief that the income chargeable to tax had escaped assessment. The court found that the reasons provided by the Assessing Officer, such as the petitioner not being a domestic company and the incorrect inclusion of foreign currency expenses in export turnover, were specific, relevant, and considerable. Therefore, the notice under Section 148 was deemed valid.

2. Failure to Obtain Approval from the Chief Commissioner or Commissioner under Section 151 of the Act:
The petitioner argued that the second respondent initiated reassessment proceedings without obtaining the necessary approval from the Chief Commissioner or Commissioner as required under Section 151 of the Act. However, the court found that the second respondent had indeed obtained the necessary sanction from the designated authority. The mere non-mentioning of the sanction in the notice did not vitiate the proceedings.

3. Alleged Non-Disclosure of Material Facts by the Petitioner:
The Revenue contended that the petitioner had not disclosed fully and truly all material facts necessary for the assessment. Specifically, the petitioner was alleged to have failed to disclose its status as a non-domestic company, the correct tax rate applicability on dividend distribution, expenses incurred out of the EEFC Fund, and the Board of approval to claim deduction under Section 10B. The court agreed with the Revenue's contention, stating that there was a failure on the part of the petitioner to disclose these material facts, which justified the reassessment proceedings.

4. Applicability of the Concept of "Change of Opinion":
The petitioner argued that the reassessment was based on a mere change of opinion, as the same materials were available during the original assessment proceedings. The court, however, held that the concept of "change of opinion" did not apply in this case. The court noted that the reasons for reopening the assessment were based on the petitioner's failure to disclose fully and truly all material facts. The court cited the Supreme Court's decision in "Phool Chand Bajrang Lal v. ITO," which emphasized that a party cannot get away by willfully making false or untrue statements at the time of the original assessment.

5. Time Limit for Issuance of Notice under Section 148 of the Act:
The petitioner contended that the notice under Section 148 was time-barred. However, the court found that the notice was issued on 26.03.2014, well within the four-year time limit from the end of the relevant assessment year (31.03.2014). Therefore, the notice was not time-barred.

6. Jurisdiction of the Assessing Officer to Reopen the Assessment:
The court examined whether the Assessing Officer had the jurisdiction to reopen the assessment under Section 147 of the Act. The court found that both conditions for reopening the assessment under Section 147 were satisfied: (i) the Assessing Officer had a reason to believe that income chargeable to tax had escaped assessment, and (ii) the income had escaped assessment by reason of the petitioner's failure to disclose fully and truly all material facts necessary for the assessment. Therefore, the Assessing Officer had the jurisdiction to reopen the assessment.

Conclusion:
The court dismissed the writ petition, holding that the reassessment proceedings initiated by the second respondent were valid and justified. The court found no scope to interfere with the impugned proceedings, and the writ petition was dismissed with no costs.

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