2019 (1) TMI 954 - HC - Income Tax

Reopening of assessment - failure on the part of the petitioner to disclose fully and truly all material facts - international transaction disclosure - assessment beyond a period of four years from the end of the relevant assessment year - Held that - In the annexure to Form No.3CEB the petitioner had shown particulars in respect of lending or borrowing money as well as the fact regarding the assessee having entered into international transactions the details whereof are shown in Appendix-4. Thus during the course of assessment proceedings the petitioner had duly disclosed the international transactions which find reference in the reasons recorded. There is no failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration. On a reading of the reasons recorded for reopening the assessment in their entirety there is nothing therein to indicate that there is any failure on the part of the petitioner to disclose fully and truly all the relevant facts. On a plain reading of the reasons recorded it is evident that the same refers to sections 92C and 92CA of the Act and the failure on part of the AO to observe the procedures prescribed thereunder. Under the circumstances this being a reopening of the assessment beyond a period of four years from the end of the relevant assessment year whereby the proviso to section 147 is clearly attracted in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts relevant for its assessment the assumption of jurisdiction on the part of the Assessing Officer is without authority of law. Notice cannot be sustained - Decided in favour of assessee.

Summary

Issues:
Validity of notice seeking to reopen assessment for assessment year 2011-12 under section 148 of the Income Tax Act, 1961.

Detailed Analysis:
The petitioner challenged the validity of the notice dated 04.12.2017 issued by the respondent under section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for assessment year 2011-12. The petitioner contended that the notice was issued beyond the four-year period from the end of the relevant assessment year, invoking the first proviso to section 147 of the Act. The petitioner argued that there was no failure on their part to disclose all material facts necessary for assessment, rendering the assumption of jurisdiction by the Assessing Officer invalid. The petitioner highlighted that the reasons recorded for reopening the assessment did not mention any such failure on their part, emphasizing that the Assessing Officer's discretion under section 92C to determine arms length price in international transactions was relevant. The petitioner asserted that the notice lacked jurisdiction and should be quashed and set aside.

On the other hand, the respondent relied on the order rejecting the petitioner's objections and the affidavit-in-reply. The reasons recorded for reopening the assessment indicated international transactions with an Associated Enterprise, including corporate cost payments, leading to an alleged underassessment of income. The respondent argued that the failure to observe procedures under sections 92C and 92CA necessitated the reopening of the assessment. However, the court found that during the scrutiny assessment, the petitioner had disclosed the international transactions, as required under section 92E of the Act, for the relevant year. The court concluded that there was no failure on the part of the petitioner to disclose material facts, and the reasons recorded did not support the assumption of jurisdiction by the Assessing Officer. The court noted that the notice was issued beyond the permissible period and lacked legal authority, thus quashing the notice and allowing the petition.