2016 (4) TMI 402 - HC - Income Tax

Reopening of assessment - Held that - All that the reasons refers to is the material already on record before the AO at the time that the original assessment order was passed under Section 143(3) of the Act. There is not a whisper that there has been a failure by the Assessee to fully and truly disclose the material facts. Consequently, the Court has no hesitation in holding that the order dated 18th March 2002, recording the reasons for the reopening of the assessment for AY 1994-95, is not in conformity with the mandatory requirement under Section 147 of the Act and therefore is unsustainable in law. - Decided in favour of assessee

Summary

Issues:
1. Reopening of assessment for Assessment Years 1993-94 and 1994-95.
2. Validity of notices issued under Section 148 of the Act.
3. Compliance with the statutory requirements for reopening assessments.
4. Legality of the assessment order passed by the Assessing Officer.

Analysis:
1. The petitioner sought to quash the reasons communicated by the Deputy Commissioner of Income Tax to reopen assessments for the years 1993-94 and 1994-95. The assessments for both years were completed earlier, and deductions were claimed under Section 80HHC of the Act. Rectification proceedings were initiated but dropped. Notices under Section 148 were issued, with the notice for 1993-94 being beyond the statutory time limit, rendering it invalid.

2. The notice for the year 1993-94 was held to be beyond the prescribed period, making it legally unsustainable. However, for the year 1994-95, the court found that the reasons provided for reopening the assessment did not meet the statutory requirements. The court emphasized the necessity for tangible material linking to the belief of income escapement and the failure to disclose all material facts by the assessee, which were absent in this case.

3. The court scrutinized the reasons for reopening the assessment for 1994-95 and concluded that the conditions for justifying the reopening were not met. The reasons merely referred to the material already on record during the original assessment, without indicating any failure by the assessee to fully disclose necessary facts. Consequently, the court held the order for reopening the assessment as non-compliant with the statutory requirements under Section 147 of the Act.

4. The assessment order passed by the Assessing Officer based on the reopening of the assessment for 1994-95 was deemed unlawful due to the failure to meet the statutory conditions for reopening assessments. The court allowed the writ petition, declaring the assessment order as invalid. No further steps had been taken post the assessment order, and the court highlighted the necessity for strict adherence to statutory provisions in such matters.