2017 (9) TMI 851 - HC - Income Tax

Reopening of assessment - proof of failure on the part of the Assessee to disclose fully and truly all material facts necessary for the assessment - Held that - Nothing prevented the AO from undertaking a detailed inquiry into the list of creditors provided by the Assessee in response to the questionnaire. It is not for the Assessee to suggest to the AO how he should conduct the inquiry. There was no failure by the Assessee to fully and truly disclose all material facts necessary for the assessment. Since the pre-requisites for assumption of jurisdiction under Section 147 of the Act were not fulfilled, the Court has no hesitation in quashing the impugned notice dated 30th March 2016 issued to the Petitioner by the AO under Section 148 (1) of the Act and all proceedings consequent thereto. - Decided in favour of assessee.

Summary

Issues:
Quashing of notice under Section 148 of the Income Tax Act, 1961 for Assessment Year 2009-10 based on failure to disclose material facts necessary for assessment.

Analysis:
The judgment revolves around the writ petition filed to challenge the notice issued under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2009-10. The primary contention was the reopening of the assessment after the expiry of four years from the relevant assessment year, invoking the first proviso to Section 147 of the Act. The Assessing Officer (AO) needed to establish a failure on the part of the Assessee to disclose all material facts necessary for assessment. The reasons recorded by the AO for reopening highlighted a significant increase in interest debited by the Assessee in the Profit and Loss account compared to the previous year. This discrepancy was flagged based on information received from the Investigation Wing of the Income Tax Department. The AO's reasons to believe that income had escaped assessment were scrutinized by the Court.

The Court observed that the reasons recorded by the AO lacked reference to tangible material that the Assessee failed to disclose, essential for forming the basis of reassessment. Despite the AO's assertion that the Assessee did not provide relevant details regarding interest payments, the Court noted that the Assessee had indeed furnished creditor details during the original assessment proceedings in response to a questionnaire. The Senior Standing Counsel for the Revenue argued that the breakdown of payments to creditors was not provided, hindering verification by the AO. However, the Court held that it was the AO's responsibility to conduct a detailed inquiry based on the information provided and not the Assessee's obligation to guide the investigation process.

Ultimately, the Court concluded that there was no failure on the Assessee's part to fully and truly disclose all material facts necessary for assessment. As a result, the prerequisites for assuming jurisdiction under Section 147 of the Act were not met, leading to the quashing of the notice dated 30th March 2016 and all subsequent proceedings. The writ petition was allowed with no costs imposed, emphasizing the importance of fulfilling statutory requirements before initiating reassessment proceedings under the Income Tax Act.