2008 (8) TMI 18 - HC - Income Tax

Re-assessment proceedings - Validity of notice issued u/s 148 - In absence of the finding that escapement in income had occurred by reason of failure on the part of the assessee action taken by the Assessing Officer is wholly without jurisdiction - invocation of Section 147 the issuance of the notice under Section 148 and the subsequent order on the objections are all without jurisdiction - impugned notice u/s 148 as well as the reassessment proceedings pursuant thereto are quashed

Summary

Issues:
Impugning notice under Section 148 of the Income-tax Act, 1961 and order disposing of objections to re-assessment proceedings.

Analysis:
The petitioner challenged a notice dated 28.03.2007 under Section 148 of the Income-tax Act, 1961, and the order dated 17.10.2007 regarding objections to re-assessment proceedings for the assessment year 2000-01. The petitioner sought to quash the notice, order, and re-assessment proceedings initiated. The Assessing Officer required the petitioner to furnish details regarding exchange fluctuation loss, which the petitioner did through a reply on 05.02.2002. However, the subsequent assessment order did not mention the exchange fluctuation loss specifically, but it was evident that the Assessing Officer considered the details filed by the petitioner. The Section 148 notice issued on 28.03.2007 was beyond the four-year period mentioned in Section 147 of the Act.

The reasons recorded by the Assessing Officer for initiating proceedings under Section 147 were related to the non-allowability of exchange fluctuation loss not backed by actual remittance. The petitioner contended that the invocation of Section 147 was without jurisdiction as there was no failure on their part to disclose all material facts necessary for assessment. The respondents argued that Section 149(1)(b) permits reopening assessments beyond four years, and since the Assessing Officer did not form an opinion on exchange fluctuation loss in the original assessment, it was not a mere change of opinion.

The court analyzed the proviso to Section 147, which requires escapement of income due to the assessee's failure to disclose all material facts necessary for assessment. The court held that since the petitioner had fully disclosed all material facts regarding exchange fluctuation loss, the pre-condition for invoking the proviso to Section 147 was not satisfied. Referring to a similar case in the Punjab and Haryana High Court, the court concluded that the Assessing Officer had acted without jurisdiction. Consequently, the court quashed the notice, order, and re-assessment proceedings, allowing the writ petition with no order as to costs.