2016 (11) TMI 120 - HC - Income Tax

Reopening of assessment - validity of notice - Held that - We find that the reasons indicate that the basis for issuing a notice was not any material outside the record but proceedings available with the Assessing Officer on the basis of which the assessment under Section 143(3) of the Act was completed. No doubt, the reasons recorded in support do use the words that income has escaped assessment on account of non-submission of any information / nondisclosure of material facts . However, merely using the above phrase as a mantra would not satisfy the requirement of the Assessing Officer having reason to believe that income chargeable to tax has escaped assessment on account of the assessee not having fully and truly disclosed all material facts necessary for assessment. The minimum the reasons should have indicated was which material fact / information the Petitioner had failed to disclose. Further how this material fact has come to his knowledge subsequent to the finalising of assessment which led to the Assessing Officer to have reason to believe that the income chargeable to tax escaped assessment. No material in support of the above is indicated in the reasons in support of the impugned notice. This clearly makes the impugned notice without jurisdiction.

Summary

Issues:
Challenge to notice dated 28 May 2001 under Section 148 of the Income Tax Act, 1961 for reopening assessment for Assessment Year 1994-95.

Analysis:
The petition challenges the notice dated 28 May 2001 issued under Section 148 of the Income Tax Act, seeking to reopen assessment for Assessment Year 1994-95. The petitioner filed its return of income for the Assessment Year 1993-94 declaring a loss of ?33.07 crores, and the Assessing Officer later determined the total income at ?71.11 lakhs. The impugned notice was issued on 28 May 2001, alleging that certain income had escaped assessment, including export credit interest, unrealized gains, DRDA subsidy, and provision for contingency frauds. The petitioner contended that all necessary facts were disclosed during the assessment proceedings in 1997, challenging the jurisdiction of the notice. The court admitted the amended challenge and stayed the impugned notice.

The Respondent-Revenue raised a preliminary objection, citing a Supreme Court decision, suggesting the petitioner file objections to the reasons recorded in the notice for the Assessing Officer's consideration. However, the petitioner argued that the notice was without jurisdiction, as evident from the reasons recorded. The court noted that a writ could be issued when the notice is without jurisdiction and does not require factual investigation, bypassing the alternative remedy. Referring to a previous case, the court emphasized that when jurisdiction is apparent on the face of the notice, the petitioner can approach the court directly under Article 226 of the Constitution.

The court examined the reasons for the impugned notice and found it lacking in indicating the failure to disclose material facts necessary for assessment, as required for reopening beyond four years from the relevant assessment year. The reasons did not specify which material facts were not disclosed or how they led to the belief that income escaped assessment. Consequently, the court held that the notice was without jurisdiction and set it aside. As a result, there was no need to direct the petitioner to file objections, and the rule was made absolute in favor of the petitioner without costs.