2008 (2) TMI 342 - HC - Income Tax

Reassessment - Notice under section 148 of the Act has been issued after a period of four years from the end of Assessment Year - absence of any evidence to show any failure or omission on the part of the assessee to disclose truly and fully all relevant particulars of income in the return of income - impugned Notice is hereby quashed and set aside

Summary

Issues:
Challenge to Notice dated 31.03.1994 issued under section 148 of the Income Tax Act, 1961.

Analysis:
The petitioner, an association of persons engaged in the business of building and development, filed a return of income for Assessment Year 1983-84 originally showing total income as Nil. The assessment order was later framed under section 143(3) of the Act on a total income of Rs.1,37,930. The Notice issued under section 148 of the Act beyond the four-year period from the end of the Assessment Year was challenged by the petitioner. The respondent relied on reasons recorded on 31.03.1994, alleging that the petitioner had not fully disclosed all necessary particulars for income computation and furnished inaccurate particulars of income. The petitioner contended that the impugned Notice was invalid as there was no omission or failure on their part to disclose all material particulars. The petitioner's submissions were supported by various legal precedents.

The respondent argued that the reopening was justified based on a certificate issued for tax deducted at source, showing an amount credited or paid in pursuance of a contract. The respondent claimed that the petitioner failed to disclose this income, justifying the reopening under section 147 of the Act. The respondent also pointed out a communication indicating that the certificate for tax deduction had been filed with the return of income for the subsequent year, supporting the reason to believe that income had escaped assessment.

After hearing both parties, the court found that the impugned Notice seeking to reopen the completed assessment for Assessment Year 1983-84 could not be allowed to operate. The court emphasized that for reopening assessments beyond four years, the revenue must establish that income escaped assessment due to the assessee's failure to fully disclose material particulars. The court analyzed the reasons recorded and found that the basis for reopening was the T.D.S. certificate, which did not conclusively prove that the payment was for work actually done. The court held that there was no evidence to show any failure or omission on the part of the assessee to disclose relevant income particulars fully and truly. Consequently, the court quashed and set aside the impugned Notice dated 31.03.1994, allowing the petition.