2008 (4) TMI 15 - HC - Income Tax

Re-opening of assessment proceedings u/s 147 / 148 on the based on the order of Municipal Corporation of Delhi regarding ratable value was dated 31st March 1994 which was not available at the time of original assessment cannot be sustained since assessee has not escaped income deliberately

Summary

Issues:
Validity of reassessment based on subsequent information.

Analysis:
The case involved three appeals questioning the correctness of the Income Tax Appellate Tribunal's decision to quash assessments under Sections 143(3) and 147 of the Income Tax Act, 1961, based on the provisions of Section 149(1)(a) of the Act. The dispute arose when the Assessing Officer reopened assessments for the years 1991-92, 1992-93, and 1993-94 after discovering discrepancies in the ratable value of properties owned by the Assessee. The Assessee argued that the annual value should be based on actual rent received, while the Assessing Officer relied on a judgment from the Calcutta High Court to determine the value at the ratable value set by the Municipal Corporation of Delhi. The Commissioner of Income Tax (Appeals) ruled in favor of the Assessee, leading to the Revenue filing appeals before the Tribunal, which rejected them, citing the proceedings as barred by limitation under the proviso to Section 147 of the Act.

The main question revolved around the validity of reassessment by the Assessing Officer based on subsequent information. The Revenue contended that the Assessee's failure to disclose correct facts exempted the case from the proviso to Section 147(1) of the Act, especially after amendments widened the scope of Section 147 from April 1, 1989. Section 147 allows for assessments where income has escaped assessment, with specific conditions for initiation after a certain period. The Central Board of Direct Taxes Circular No.549 clarified the requirement for disclosure of material facts, emphasizing their existence at relevant times. The Court noted that the Assessee had filed returns for all relevant years, disclosing material facts, and completed assessments under Section 143(3) after scrutiny. Therefore, the initiation of reassessment based on subsequent material not available during the original assessment was deemed unjustified.

The Court highlighted that the proviso to Section 147 becomes relevant when there is non-disclosure of material facts by the Assessee, exempting them from further action even if income escaped assessment. Section 149(1)(a) sets limitations on issuing notices for escaped income based on elapsed time from the relevant assessment year. In this case, the initiation beyond four years and lack of deliberate concealment by the Assessee rendered the reassessment invalid. The Court upheld the Tribunal's decision, dismissing the Revenue's appeals as no substantial question of law arose in the case.