2015 (11) TMI 1138 - HC - Income Tax

Reopening of assessment - Held that - No whisper of the petitioner having failed to disclose fully and truly all the material facts necessary for its assessment. It is therefore clear that the necessary ingredients for invoking the provisions of Section 147 beyond the period of four years are missing. As such, the initiation of the reassessment proceedings pertaining to the assessment year 2005-06 is without the authority of law. We may also point out that the very issue which has been raised in the reasons has been considered in detail in the course of the original assessment proceedings. In fact, the reasons themselves indicate that what is sought to be done through reassessment was already available in the record of the assessment proceedings. The agreements which have been referred to in the reasons were available before the Assessing Officer and had been examined in detail by the Assessing Officer. Therefore, there is also substance in reopening of assessment - Decided in favour of assessee.

Summary

Issues:
Challenge against notice under Section 148 of the Income Tax Act, 1961 for Assessment Year 2005-06 and rejection of objections by the Assessing Officer.

Analysis:
The notice under Section 148 was challenged as it was issued beyond the four-year period from the end of the relevant assessment year. The reasons for initiating reassessment were provided, indicating that the petitioner's PE in India and subscription revenues were taxed as royalty income. The Double Taxation Avoidance Agreement (DTAA) between India and the US, along with relevant sections of the Income Tax Act, were cited to support the taxation of royalty income. The petitioner's objections were rejected by the Assessing Officer, leading to the challenge in court.

The court observed that the reasons for reassessment did not mention any failure on the petitioner's part to disclose material facts necessary for assessment, a pre-condition under Section 147 of the Act. Citing legal precedents, it was concluded that the ingredients for invoking Section 147 beyond the four-year period were absent, rendering the reassessment proceedings unauthorized. Additionally, the court noted that the issue raised in the reasons had already been considered during the original assessment proceedings, indicating a mere change of opinion in reopening the assessment.

As a result of the analysis, the court quashed the notice under Section 148, the subsequent proceedings, and the order rejecting objections. The writ petition was allowed, with no costs imposed on either party.