2006 (9) TMI 87 - HC - Income Tax

Reassessment - AO issued notice u/s 148 after four year of finalisation of assessment on the basis of same facts resolved on earlier assessment - Held that notice issued u/s 148 not valid

Summary

Issues:
Challenge against the issuance of notice under Section 148 of the Income Tax Act, 1961 for reopening the assessment of the petitioner's income for the assessment year 1984-85.

Analysis:
The petitioner filed its return of income for the assessment year 1984-85 under Section 139(1) of the Act in June 1984. An assessment order was passed in September 1984. Subsequently, a survey was conducted in December 1985, leading to the initiation of reassessment proceedings in April 1986 based on impounded documents. The petitioner then applied for an amnesty scheme in December 1987, surrendering income from undisclosed sources. The Inspecting Assistant Commissioner passed an order of settlement in March 1987, requiring additional income surrender. The assessment was made accordingly, and taxes were paid. However, a notice for reassessment was issued in March 1991, after the expiry of four years from the relevant assessment year.

The petitioner contested the validity of the reassessment proceedings on two grounds. Firstly, it was argued that initiating reassessment based on the same report considered in the settlement order amounted to a change of opinion by the Income Tax Officer, lacking jurisdiction. Secondly, it was contended that since all documents for reassessment were in possession of the Assessing Officer since 1985, any failure to disclose facts could not be attributed to the petitioner. Therefore, the notice issued in 1991 was beyond the limitation period.

The Court examined the reasons recorded by the Assessing Officer before issuing the notice under Section 148. It was found that the satisfaction of the Assessing Officer for income escapement did not attribute any default to the petitioner. The Proviso to Section 147 restricts jurisdiction after four years from the end of the relevant assessment year if no default is attributable to the assessee. As the notice was issued after the limitation period, it was held that the Assessing Officer lacked jurisdiction to continue the proceedings.

The Court referenced the duty of the assessee to disclose all primary facts relevant to assessment, as established by the Supreme Court. The reassessment order was made after considering documents seized from the petitioner, and the subsequent notice in 1991 did not refer to any omission by the assessee. Therefore, the Court concluded that the Assessing Officer exceeded jurisdiction by issuing the notice after the limitation period, and the petitioner's challenge was upheld.

As a result, the petition was allowed, the impugned notice was quashed, and the respondents were restrained from further proceedings. No costs were awarded in the judgment.