2016 (12) TMI 1294 - HC - Income Tax

Reopening of assessment - Held that - Notice has been served within six years from the end of the relevant assessment year and the tax effect is in crores of rupees and therefore, the Assessing Officer was justified in initiating proceedings and in rejecting the objections raised by the petitioner. The net result is that this Court is of the considered opinion that notice has been served within the time frame work to the assessee, notice has rightly been served as the Assessing Officer was having reasons to believe and there was a failure on the part of the assessee to disclose the fully and truly material and facts at the time of proceedings initiated under Section 143(3) of the Act. Resultantly, admission is declined. However, it is made clear that anything observed by this Court in the present order will not come in way of the assessee in respect of proceedings which are going on before the Income Tax Department as well as before the other authorities.

Summary

Issues Involved:
1. Validity of reassessment proceedings initiated under Section 148 of the Income Tax Act, 1961.
2. Alleged failure to disclose true and material facts by the petitioner.
3. Applicability of the limitation period for reassessment under Section 147 of the Income Tax Act, 1961.
4. Alleged change of opinion by the Assessing Officer.
5. Availability of alternative remedy.

Issue-wise Detailed Analysis:

1. Validity of Reassessment Proceedings Initiated under Section 148:
The petitioner, a company registered under the Companies Act, 1956, challenged the reassessment proceedings initiated by the Assessing Officer (AO) for the Assessment Year (AY) 2009-10. The AO issued a notice under Section 148 on 18/03/2016, and the petitioner filed objections against the reassessment, arguing that it was initiated after four years from the end of the relevant AY. The AO rejected these objections on 28/11/2016.

2. Alleged Failure to Disclose True and Material Facts:
The petitioner contended that there was no failure on its part to disclose true and material facts necessary for assessment. The reassessment was based on the audit report, which had been previously brought to the AO's notice. The petitioner argued that the reassessment was a result of a mere change of opinion, which does not empower the AO to initiate proceedings under Sections 147/148 of the Act. The AO, however, stated that the petitioner failed to disclose fully and truly all material facts, particularly regarding the change in the method of slow-moving inventory and the submission of Form No. 56-F for claiming exemption under Section 10AA.

3. Applicability of the Limitation Period for Reassessment:
The petitioner argued that the reassessment notice was issued beyond the statutory time limit of four years as prescribed under Section 147 of the Act. The AO countered this by stating that the notice was issued within six years from the end of the relevant AY, as the income chargeable to tax which escaped assessment amounted to more than one lakh rupees, thus falling under the extended period provided in Section 149(b) of the Act.

4. Alleged Change of Opinion by the Assessing Officer:
The petitioner relied on various judgments, including those of the Delhi High Court and Bombay High Court, to argue that the reassessment was based on a mere change of opinion, which is not permissible under the law. The AO, however, maintained that the reassessment was initiated based on new material facts that were not considered during the original assessment, thus justifying the reopening of the case.

5. Availability of Alternative Remedy:
The petitioner also argued that the availability of an alternative remedy should not be a ground to decline the admission of the writ petition. The court, while acknowledging this argument, emphasized that the AO had valid reasons to believe that income had escaped assessment and that the reassessment proceedings were initiated within the permissible time frame.

Conclusion:
The court concluded that the AO had valid reasons to believe that income had escaped assessment due to the petitioner's failure to disclose fully and truly all material facts during the original assessment proceedings. The reassessment notice was issued within the extended period of six years, as the tax effect involved was substantial. Consequently, the court declined to admit the writ petition, affirming the validity of the reassessment proceedings. However, it clarified that the observations made in the judgment would not affect the ongoing proceedings before the Income Tax Department and other authorities.