2010 (1) TMI 35 - HC - Income Tax

Taxability of a sum kept under a fund - Transport Infrastructure Utilization Fund (TIUF) Diversion of income by overriding title - The fact that the petitioner kept aside a sum of Rs 5/- per bottle for the TIUF was disclosed by the petitioner in its income tax return. In fact the department had in respect of earlier assessment years taken the stand that the said sum of Rs 5/- per bottle was taxable in the hands of the petitioner. However in respect of the assessment year 1990-91 and 1991-92 the matter was carried in appeal to the Income Tax Appellate Tribunal which by its decision dated 31st August 1995 held the same not to be taxable after recording a finding that it was nothing but diversion of income by overriding title held that - holding that initiation of the proceedings in question was based entirely on change of opinion we find that the re-assessment proceedings are without jurisdiction. The notices under Section 147/148 of the said Act and the proceedings pursuant thereto stand quashed

Summary

Issues Involved:
Reopening of completed assessments based on change of opinion, Jurisdiction of Assessing Officer under Section 147 of the Income Tax Act, 1961, Full and true disclosure by the assessee, Proviso to Section 147 in relation to the time limit for issuing notices.

Detailed Analysis:

1. Reopening of Completed Assessments based on Change of Opinion:
The judgment addresses the issue of reopening completed assessments based on a change of opinion by the Assessing Officer. The court emphasized that a mere change of opinion does not entitle the Assessing Officer to reopen a completed assessment. It was highlighted that the power of reassessment is distinct from the power of review, and allowing a change of opinion as a ground for reassessment would essentially grant the Assessing Officer the power to review decisions, which is not within their jurisdiction.

2. Jurisdiction of Assessing Officer under Section 147:
The judgment delves into the jurisdiction of the Assessing Officer under Section 147 of the Income Tax Act, 1961. It was noted that the Assessing Officer had applied his mind to the matter of setting aside a specific amount per bottle for the Transport Infrastructure Utilization Fund (TIUF). The court found that the reopening of assessments in this case amounted to a mere change of opinion, which is impermissible under established legal principles.

3. Full and True Disclosure by the Assessee:
The court examined whether the assessee had made a full and true disclosure of relevant facts. It was observed that there was no allegation in the reasons recorded by the Assessing Officer that the assessee failed to make a full and true disclosure. The court noted that the nature and treatment of the TIUF by the assessee had been clearly indicated in the books of accounts and examined by the Assessing Officer during the original assessment process.

4. Proviso to Section 147 - Time Limit for Notices:
Regarding the proviso to Section 147 concerning the time limit for issuing notices, the judgment highlighted that for the assessment years 1997-98 and 1998-99, the notices had been issued beyond the prescribed four-year period. The court emphasized that before the Assessing Officer could reopen assessments for these years, it needed to be shown that the assessee did not make a full and true disclosure. Since the assessee had filed a return and disclosed relevant information, the court found this ground available in favor of the assessee.

In conclusion, the court ruled that the reopening of assessments based on a change of opinion lacked jurisdiction. The notices under Section 147/148 of the Income Tax Act were quashed, with the judgment focusing on jurisdiction rather than the merits of the taxability issues related to the amount transferred to the TIUF. The writ petition was allowed, with no order as to costs.