2016 (12) TMI 1555 - HC - Income Tax

Validity of reopening of assessment - reasons to believe - non entitlement to writing of premium and claiming notional loss also on revaluation of year end - Held that - There is no allegation whatsoever that there was any failure on the part of the assessee in disclosing true and correct facts necessary for assessment. From the reasons recorded, it appears that according to the AO though the assessee was not entitled to both the benefits simultaneously i.e. writing of premium and claiming notional loss also on revaluation of year end and still such benefit have been granted by the AO. Therefore, it is not a case that there was any failure on the part of the assessee in not disclosing true and correct facts. As observed herein above, even there are no allegation in the notice as well as the reasons recorded that there was any failure on the part of the assessee in not disclosing true and correct facts necessary for assessment. In that view of the matter the condition precedent to assume jurisdiction under Section 147 of the Act to reopen the assessment beyond the period of four years, more particularly, contained in proviso to Section 147 of the Act are not satisfied. - Decided in favour of assessee.

Summary

Issues:
Challenge to reopening of assessment under Section 148 of the Income Tax Act beyond the four-year period for AY 2009-10.

Analysis:
1. The petitioner, a Cooperative Bank, filed its return of income for AY 2009-10 and subsequently a revised return. The Assessing Officer issued notices under Section 143(2) and 142(1) of the Act, which were duly complied with. An order under Section 143(3) was passed on 13.09.2011. However, beyond the four-year period, the Assessing Officer sought to reopen the assessment for AY 2009-10 under Section 148 of the Act.

2. The reasons recorded for reopening the assessment highlighted certain provisions made by the bank, alleging that income chargeable to tax over ?1 lakh had escaped assessment. The bank raised objections against the reopening, which were subsequently dismissed by the Assessing Officer. This led to the filing of a Special Civil Application under Article 226 of the Constitution of India.

3. The petitioner contended that there was no failure on its part to disclose true and correct facts during the original assessment, and therefore, the jurisdiction assumed by the Assessing Officer under Section 147 was legally flawed. The petitioner heavily relied on the decision of the Supreme Court in CIT vs. Kelvinator of India Limited (2010) to support its argument.

4. On the other hand, the revenue argued in favor of the reopening, citing discrepancies in the bank's provisions for overdue interest and government securities premium amortization. The revenue contended that the Assessing Officer was justified in issuing the impugned notice under Section 148.

5. The High Court, after hearing both parties, emphasized the importance of satisfying the conditions precedent to invoking jurisdiction under Section 147 to reopen an assessment beyond four years. It noted that there was no allegation of failure on the part of the petitioner to disclose correct facts necessary for assessment in the reasons recorded for reopening. As per the decision in Kelvinator of India Limited, the Court ruled in favor of the petitioner, quashing the notice to reopen the assessment for AY 2009-10.

6. Consequently, the High Court allowed the petition, quashing the impugned notice and reassessment proceedings for AY 2009-10. The Court held that the conditions for reopening the assessment beyond the four-year period were not met, leading to the decision in favor of the petitioner.