2016 (9) TMI 644 - HC - Income Tax

Reopening of assessment - reasons the believe - Held that - The impugned notice under section 148 of the Act has been issued on 18.03.2015 for reopening the assessment for assessment year 2008-09, which is clearly beyond a period of four years from the end of the relevant assessment year. On a perusal of the reasons recorded it is amply clear that there is nothing stated therein to the effect that there was any failure on the part of the petitioner to disclose fully and truly all material facts. Thus, the second condition precedent for exercise of powers under section 147 of the Act is clearly not satisfied. Moreover, even as regards the first condition, namely, that the Assessing Officer should record satisfaction that income chargeable to tax should have escaped assessment, in the light of the reasons recorded by this court in the case of Shri Chalthan Vibhag Khand Udhyog Sahakari Mandali Ltd. v. Deputy Commissioner of Income Tax (2015 (7) TMI 297 - GUJARAT HIGH COURT ), it cannot be said that on the reasons recorded for reopening the assessment, the Assessing Officer could have formed the belief that income chargeable to tax has escaped assessment. Therefore, even the first condition precedent for exercise of powers under section 147 of the Act, is not satisfied. Under the circumstances, the impugned notice issued under section 148 of the Act cannot be sustained.

Issues:
1. Validity of notice dated 18.03.2015 issued under section 148 of the Income Tax Act, 1961 for reopening the assessment of the petitioner for assessment year 2008-09.
2. Compliance with the provisions of section 147 of the Act regarding the conditions for reopening the assessment.
3. Comparison of reasons recorded for reopening the assessment in the present case with a previous judgment.
4. Application of law based on previous court decisions regarding similar cases.
5. Examination of the grounds for reopening the assessment and the sufficiency of reasons recorded.

Issue 1:
The petition challenged the notice dated 18.03.2015 issued by the respondent under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment of the petitioner for the assessment year 2008-09. The petitioner had requested that the return as originally filed be considered in response to the reassessment notice and had also asked for a copy of the reasons recorded. The respondent proceeded with the reassessment order within eight days of rejecting the petitioner's objections, contrary to the one-month period guideline set by the court in Garden Finance Ltd. v. Assistant Commissioner of Income Tax. The petitioner contended that the notice lacked merit and should be quashed.

Issue 2:
The court analyzed the compliance with the provisions of section 147 of the Act concerning the conditions for reopening the assessment. The first proviso to section 147 requires the Assessing Officer to have twin satisfaction: that income chargeable to tax has escaped assessment and that such escapement is due to the petitioner's failure to disclose all material facts. The court found that the reasons recorded did not indicate any failure on the petitioner's part to disclose material facts, thus not meeting the second condition. Additionally, the court determined that the Assessing Officer did not have sufficient grounds to believe that income chargeable to tax had escaped assessment, as required by the first condition.

Issue 3:
A comparison was made between the reasons recorded for reopening the assessment in the present case and a previous judgment involving similar grounds. The court noted that the grounds for reopening the assessment were identical in both cases. The previous judgment had set aside the notice under section 148 of the Act due to a borrowed satisfaction without proper application of mind, which was also found lacking in the present case.

Issue 4:
The court applied the law based on previous court decisions regarding similar cases. Reference was made to a previous decision that had set aside a notice under section 148 in a case with comparable circumstances. The court also highlighted that the petitioner had challenged the reopening of assessments for other years in a previous case that had been upheld by the Supreme Court, indicating the finality and relevance of the previous decisions.

Issue 5:
The court examined the grounds for reopening the assessment and the sufficiency of reasons recorded. It concluded that the notice issued for reopening the assessment for the assessment year 2008-09 could not be sustained due to the failure to meet the conditions precedent under section 147 of the Act. Therefore, the court allowed the petition, quashed the notice dated 18.03.2015, and set aside the assessment order.

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