2017 (4) TMI 1463 - HC - Income Tax

Validity of reopening of assessment - Whether notice u/s 147 issued to the Assessee for reassessment after four years was barred by limitation? - HELD THAT - Question No.1 is answered in favour of appellant and it is held that limitation in the case in hand was six years under Section 149(i)(b) hence notice under Section 147 was not barred by limitation and finding of Tribunal on this issue which otherwise is reverse Whether the reasons given by competent authority approving reassessment is within scope of Section 147 of Act 1961? - Coming to the second question it is not in dispute that entire amount and deduction claimed by Assessee was fully disclosed to Assessing Officer when assessment was made by allowing claimed deduction under Section 154 on 07.12.2007 and subsequent orders under Sections 144 251 and 254 would make no substantial difference in this regard. That being so we have to examine whether here is a case of change of opinion or it is a case of genuine reason to believe to Assessing Officer that any income chargeable to tax has escaped assessment for A.Y. in question. There has to be some valid ground that is some relevant document or material having escaped notice or there has been wrong calculation due to human error bona fide committed or ignorance of correct and complete facts due to mistake or ignorance of fraud/ misrepresentation. It is not in dispute that Assessee has disclosed full and correct facts and there was no misrepresentation or concealment on the part of Assessee at all. With open eyes after examining the entire matter AO completed assessment under Section 143(3) and that being so subsequent changed opinion that 100% depreciation has wrongly been allowed it could not have issue notice under Section 147. In this regard view taken by Tribunal we find is correct and in accordance with law. Question No.2 therefore is answered against appellant and in favour of Assessee.

Summary

Issues:
1. Whether the notice issued for reassessment after four years was barred by limitation?
2. Whether the reasons for approving reassessment were within the scope of the Income Tax Act, 1961?

Analysis:

Issue 1:
The appeal was filed by the Principal Commissioner of Income Tax-II, Lucknow, challenging the judgment and order passed by the Income Tax Appellate Tribunal, Lucknow Bench, related to the Assessment Year 2005-06. The Assessing Officer issued a notice under Section 148 of the Income Tax Act in 2012 for reopening the assessment, citing excessive deductions claimed by the Assessee. The Tribunal held that the reopening of assessment was invalid as the notice was issued after four years, thus barred by limitation. However, the court disagreed with this finding, citing Section 149(1)(b) of the Act, which allows a six-year limitation if the escaped income exceeds one lakh rupees. Therefore, the notice under Section 147 was not barred by limitation, reversing the Tribunal's decision.

Issue 2:
Regarding the second issue, the court examined whether there was a genuine reason for the Assessing Officer to believe that income had escaped assessment. The Assessee had fully disclosed all relevant information during the original assessment. Citing legal precedents such as Commissioner of Income Tax Vs. Kelvinator of India Ltd., the court emphasized that the Assessing Officer must have tangible material to justify reopening an assessment. The court also referred to cases like Ganga Saran and Sons P. Ltd. Vs. ITO, Sheo Nath Singh Vs. AAC of I.T., and Calcutta Discount Co. Ltd. Vs. ITO to highlight the conditions that must be met for a valid reassessment. In this case, since the Assessee had disclosed all primary facts during the original assessment, the court concluded that there was no valid reason for reassessment. The Tribunal's decision to set aside the reassessment proceedings was upheld, and the appeal was dismissed.

This detailed analysis of the judgment from the Allahabad High Court highlights the legal intricacies involved in the issues of limitation for reassessment notices and the requirements for valid reasons to believe income has escaped assessment under the Income Tax Act, 1961.