2018 (3) TMI 1356 - HC - Income Tax

Reopening of assessment - failure on the part of the assessee to withhold to furnish the material particulars - reason to believe- Held that - If the primary facts are placed before the Assessing Officer, the Assessing Officer is in a position to take decision thereupon, it cannot amount to failure on the part of the assessee to withhold to furnish the material particulars. AO in the impugned order has referred to various decisions, however, none of the decisions lay down that even though the primary facts were placed before the AO at the time of scrutiny, on account of non-furnishing of the Form at the time of the original assessment, the assessment can be reopened, neither any such decision is brought to our notice. Thus Petitioner had placed on record the necessary information for the purpose of assessing income as regard the transfer of shares. What is sought to be done by the Assessing Officer now is a reopening of assessment after four years, on a mere change of opinion. The non-furnishing of the Form is only an excuse given by the Assessing Officer to attempt to exercise an nonexistent power. - Decided in favour of assessee

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, rejection of objections by the Petitioner, reassessment proceedings for Assessment Year 2010-11.

Detailed Analysis:

Issue 1: Challenge to Notice under Section 148
The Petitioner sought a declaration to quash the notice issued under Section 148 of the Income Tax Act, dated 29 March 2017, along with the order rejecting objections raised on 9 November 2017. The Petitioner, a Company under the Companies Act, had filed its return for the Assessment Year 2010-11, which was selected for scrutiny. The Assessing Officer passed the scrutiny assessment order on 22 March 2013. However, after four years, a notice was issued under Section 148, alleging failure to disclose material facts necessary for assessment. The Petitioner challenged this reassessment through a writ petition, arguing that all relevant information was provided during scrutiny.

Issue 2: Legal Position on Reassessment
Section 147 of the Act allows for income escaping assessment to be reopened within four years, subject to the assessee's failure to disclose all material facts. The legal position, as established by various court decisions, requires the Assessing Officer to have jurisdictional grounds based on non-disclosure of material facts to proceed with reassessment. Reasons provided for reassessment must be sufficient and cannot be merely a reproduction of statutory language. The failure to fully and truly disclose all material facts is a prerequisite for reassessment, and if not met, the assessee can challenge the reassessment in court.

Issue 3: Non-Disclosure of Form 29B
The Assessing Officer alleged that the Petitioner did not furnish Form 29B, leading to an escapement of income. However, the Petitioner argued that all primary facts, including the nature of the transaction involving shares of Goa Carbon Limited, were disclosed during scrutiny. The Assessing Officer's attempt to reopen the assessment based on a change of opinion and the non-furnishing of Form 29B after the original assessment stage was deemed unjustified.

Conclusion
The Court found that the Petitioner had provided all necessary information during scrutiny, and the Assessing Officer's attempt to reopen the assessment after four years was based on a mere change of opinion. As the jurisdictional requirements for reassessment were not met due to the Petitioner's disclosure of primary facts, the writ petition was allowed, quashing the reassessment proceedings. The Court held that the Petitioner succeeded in demonstrating full disclosure of material facts required for assessment, leading to the dismissal of the reassessment.