2017 (1) TMI 121 - HC - Income Tax

Validity of reopening of assessment - non issue of notice - contention raised by the petitioner is that though, in the notice, the date 31.3.2004 is mentioned, it was served only after six years and the same was issued without assigning any reason - Held that - The original assessment is shown to have been made for the year 1997-98. Thereafter, a notice under section 148 of the Act was issued after four years that too without assigning any reason for re-opening the assessment and when it was sought for by the assessee, it was furnished by the Department only by their communication dated 19.12.2005. It appears that the reason for re-opening the assessment was not shown to be the failure on the part of the assessee in disclosing the returns with full and true material facts. Such being the case, no care has been taken to issue the notice within four years from the end of the assessment. Though the wordings used in the section concerned is issue of notice, that does not mean affixing the signature itself will amount to issue of notice, but, the said notice has to be set in motion to get the meaning of the term issue of notice and as far as the case in hand is concerned, since the notice has been served on the petitioner by hand delivery only in February 2005, in the absence of contention to the contrary, the stand of the assessee has to be accepted. It has been observed further that though the Department had relied on explanation (1) to Section 147 of the Act and contended that mere furnishing of the account book is not sufficient and particulars should have been given, this should have been disclosed in the notice concerned in detail, but, in the absence of the same, this court cannot accept the stand of the Department.- Decided against revenue

Summary

Issues:
Challenge to order of learned Single Judge dated 15.9.2011 in W.P.No.7459 of 2006.
Validity of notice under section 148 of the Income Tax Act 1961 for assessment year 1997-1998.

Analysis:

Issue 1: Challenge to order of learned Single Judge
The appeal was filed by the Department challenging the order of the learned Single Judge dated 15.9.2011 in W.P.No.7459 of 2006. The writ petition was filed by the assessee seeking a writ of certiorarified mandamus to quash the proceedings of the respondent under section 148 of the Income Tax Act 1961 for the assessment year 1997-1998. The main contention raised was the delay in serving the notice dated 31.3.2004, which the petitioner claimed was served only on 10.2.2005 without assigning any reason for re-opening the assessment. The learned Single Judge quashed the impugned notice based on the interpretation that the notice was served on 10.2.2005, not on 31.3.2004 as claimed by the Department.

Issue 2: Validity of notice under section 148
The Department contended that the notice was dispatched on 31.3.2004, but the authenticity of this claim was questioned as the despatch register lacked a signature for that entry. The Department failed to provide proof of despatch on the claimed date. The learned Single Judge held that the notice was served on 10.2.2005, concluding that the notice should have been served only after six years. Referring to the judgment in FENNER (INDI) LIMITED v. DEPUTY COMMISSIONER OF INCOME TAX, it was established that issuing a notice beyond four years without recording reasons for belief of income escapement and failure to disclose material facts vitiates the proceedings under section 148 of the Act. The court emphasized that mere escapement of assessment is insufficient for action after four years without failure to disclose material facts fully and truly. The court upheld the Single Judge's decision, dismissing the appeal and closing the connected miscellaneous petition.

In conclusion, the High Court of Madras upheld the decision of the learned Single Judge, dismissing the appeal filed by the Department and confirming the quashing of the impugned notice under section 148 of the Income Tax Act 1961 for the assessment year 1997-1998.