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2018 (2) TMI 441 - HC - Income TaxReopening of assessment - validity of notice issues - eligible reasons to believe - Addition u/s 40A - Held that - The first condition is not attracted inasmuch as there is no allegation that the petitioner has failed to file a return, as contemplated in the proviso. Insofar as the second condition is concerned, on a perusal of the reasons recorded, it is evident that there is not even a whisper therein as regards any failure on the part of the petitioner to disclose truly and fully all material facts necessary for the assessment nor can any such failure be culled out upon considering the reasons in their entirety. Under the circumstances, the assumption of jurisdiction on the part of the Assessing Officer under section 147 of the Act after a period of four years from the end of the relevant assessment year is without any authority of law. Assessment is sought to be reopened on the ground that various expenses were paid, out of which, payment was made in cash to eight persons which was required to be disallowed under section 40A(3) of the Act. A perusal of the documents annexed along with the petition reveals that at the time of the scrutiny assessment proceedings under section 143(3) of the Act, the Assessing Officer had called for details of the expenses incurred by the petitioner, who had duly submitted the same. The statements submitted by the petitioner clearly revealed the payments made in cash to different parties in detail. Evidently, therefore, at the time of the regular assessment, the Assessing Officer had gone into the issue and had not thought it fit to make any disallowance under section 40A(3) of the Act. Therefore, the reopening is based upon a mere change of opinion, which also renders the impugned notice unsustainable. - Decided in favour of assessee.
Issues:
Validity of notice under section 148 of the Income Tax Act, 1961 for assessment year 2011-12. Analysis: The petitioner, a partnership firm, challenged the validity of the notice dated 25.3.2017 issued by the respondent under section 148 of the Income Tax Act, 1961. The petitioner had filed its return of income for assessment year 2011-12 on 30.4.2012. The Assessing Officer completed the regular assessment under section 143(3) of the Act on 4.3.2014. Subsequently, the respondent issued the impugned notice under section 148 of the Act, proposing to reassess the total income of the petitioner for assessment year 2011-12. The petitioner objected to the reopening of assessment, which was rejected by the respondent. The petitioner argued that the notice issued on 25.3.2017, beyond four years from the relevant assessment year, lacked jurisdiction as there was no failure to disclose all material facts. The petitioner contended that the reopening was based on a mere change of opinion, rendering the notice unsustainable in law. The reasons recorded for reopening the assessment highlighted that certain expenses were paid in cash exceeding the limit specified under section 40A(3) of the Act, leading to underassessment of income. However, during the scrutiny assessment proceedings under section 143(3) of the Act, the Assessing Officer had already examined the details of expenses submitted by the petitioner, including cash payments to different parties, without making any disallowance under section 40A(3) of the Act. The court observed that the reopening of assessment based on the same issue indicated a mere change of opinion, further invalidating the impugned notice. The court analyzed the legal provisions under section 147 of the Act and concluded that the first proviso to section 147 would be attracted in this case as the assessment was sought to be reopened beyond the stipulated four-year period. The court emphasized that for the reopening of assessment, either there should be an income chargeable to tax that escaped assessment due to failure on the part of the petitioner, or there should be a failure to disclose all material facts necessary for assessment. In this case, neither condition was satisfied, as there was no failure to file a return or disclose material facts. Therefore, the court held that the assumption of jurisdiction by the Assessing Officer under section 147 of the Act after four years from the relevant assessment year lacked legal authority. In conclusion, the court found that the impugned notice dated 25.3.2017 under section 148 of the Act for assessment year 2011-12 was unsustainable on both counts. The petition was allowed, and the notice was quashed and set aside, with no order as to costs.
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