2015 (10) TMI 947 - HC - Income Tax

Reopening of assessment - Held that - There is no whisper of the petitioner having failed to disclose fully and truly all material facts necessary for his assessment. Therefore, the necessary ingredient for inviting the provisions of Section 147 is missing. As such, the initiation of the re-assessment proceedings pertaining to assessment year 2004-05 does not have the backing of law. Consequently, the impugned notice under Section 148 and all proceedings pursuant thereto including the order disposing of the objections are set aside - Decided in favour of assessee.

Summary

Issues:
Challenge to notice under section 148 for assessment year 2004-05 based on failure to fully disclose material facts necessary for assessment.

Analysis:
The judgment pertains to a writ petition challenging the notice under section 148 for the assessment year 2004-05. The petitioner contests the reopening of assessment beyond four years from the end of the assessment year, invoking the first proviso of section 147 of the Income Tax Act, 1961. The petitioner argues that there was no failure on their part to fully and truly disclose all material facts necessary for assessment, a prerequisite for reopening assessments. The court refers to a previous decision emphasizing the necessity of alleging such failure before taking action beyond the stipulated period. The court highlights that the reasons for reopening in the present case do not indicate any such failure on the part of the petitioner. Therefore, the initiation of reassessment proceedings lacks legal basis, leading to the setting aside of the impugned notice under Section 148 and related proceedings.

The original assessment under Section 143(3) for the relevant year was completed on a specific date. The counsel for the petitioner argues that the reopening of assessment beyond the prescribed period is impermissible due to the absence of any failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. The court relies on precedent to support the contention that the reasons for reopening must explicitly allege such a failure, which is missing in the present case. Consequently, the court rules in favor of the petitioner, setting aside the notice under Section 148 and subsequent proceedings.

The court scrutinizes the reasons provided for reopening the assessment for the relevant year. The reasons focus on the Permanent Establishment (PE) of the assessee in India and the taxation of royalty income at a different rate. However, the court observes that these reasons do not contain any indication of the petitioner's failure to fully and truly disclose all material facts necessary for assessment. As this crucial element is absent, the court concludes that the initiation of reassessment proceedings lacks legal validity. Therefore, the court allows the writ petition, with no order as to costs, and sets aside the impugned notice under Section 148 along with all related proceedings.

In conclusion, the judgment revolves around the challenge to the notice under section 148 for the assessment year 2004-05 based on the contention that there was no failure on the part of the assessee to fully disclose all material facts necessary for assessment. The court emphasizes the importance of explicitly alleging such failure before reopening assessments beyond the prescribed period. As the reasons for reopening in this case do not meet this requirement, the court rules in favor of the petitioner, invalidating the reassessment proceedings.