2017 (1) TMI 1657 - HC - Income Tax

Reopening of assessment u/s 147 - notice beyond the period of four years from the date of the relevant assessment year - eligibility of reason to believe - proof of failure on the part of the assessee to disclose fully and truly all material facts - HELD THAT - In the present case, at the time of original assessment, which was a scrutiny assessment under Section 143 3 the assessee disclosed interest expenses in the Profit Loss Account and investment in the Balance-sheet. The assessee also disclosed in the return of income, the exempt income. The assessee also furnished details of investment at the original assessment stage. Despite the above, the Assessing Officer, while framing scrutiny assessment under Section 143 3 of the Act did not make any disallowances under Section 14A of the Act. Under the circumstances, it cannot be said that there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Assumption of jurisdiction to reopen the assessment beyond the period of four years is without jurisdiction and contrary to the provisions of Section 147 - Decided in favour of assessee.

Summary

Issues:
Challenge to the impugned Notice dated 30th March 2016 issued under Section 148 of the Income-tax Act, 1961 for reopening the assessment for Assessment Year 2009-2010 beyond the four-year period.

Analysis:
The petitioner filed a return of income for A.Y 2009-2010, declaring total income. The Assessing Officer sought to reopen the assessment beyond four years, alleging that income chargeable to tax had escaped assessment due to failure to disclose fully and truly all material facts. The petitioner objected, stating no failure in disclosure and challenging the jurisdiction of the Assessing Officer. The Assessing Officer disagreed and continued the reassessment proceedings, leading to the present Special Civil Application challenging the reopening.

The petitioner's counsel argued that the reopening was beyond the four-year limit without any failure in disclosure. The petitioner had disclosed interest expenses, investments, and exempt income during the original assessment, and the Assessing Officer did not make any disallowances under Section 14A of the Act at that time. Therefore, there was no failure in disclosure, and the jurisdiction to reopen the assessment was unjustified.

The Revenue's counsel contended that the impugned notice was valid as the petitioner failed to disclose expenses to be disallowed under Section 14A of the Act. The Revenue argued that the petitioner's failure to disclose these facts constituted a failure in disclosing true and correct facts necessary for assessment, justifying the reopening.

The Court noted that for reopening an assessment beyond four years, there must be a failure on the part of the assessee to disclose true and correct facts. Despite the petitioner disclosing relevant details during the original assessment, the Assessing Officer did not make any disallowances under Section 14A. Therefore, the Court held that there was no failure in disclosure, rendering the reopening beyond the four-year period without jurisdiction. Consequently, the impugned notice and the reopening of the assessment for A.Y 2009-2010 were quashed and set aside.

In conclusion, the Court ruled in favor of the petitioner, quashing the impugned notice and setting aside the reassessment for A.Y 2009-2010, citing lack of jurisdiction due to no failure in disclosure of material facts necessary for assessment.