2019 (4) TMI 515 - HC - Income Tax

Reassessment notice u/s 148 - after four years of the assessment u/s 143(3) - carry forward the losses will not be allowable as return filed 139(4) - HELD THAT - Notice u/s 148 has been issued solely on the ground that the petitioner had not filed return within the due date as mentioned u/s 139(1) claiming carry forward and set off of business loss. Section 139(4) of the Income Tax permits an assessee to file the Income Tax Return by the end of the assessment year or before completion of assessment, whichever is earlier. In the present case, the return has been filed before end of the assessment year that is on the last date of the assessment year. The same was permissible. It cannot be said that it was failure on the part of the petitioner to disclose the true and correct facts or that an income chargeable to tax has escaped assessment by reasons of failure on the part of the assessee to file return u/s 139 or in response to notice issued u/s 142(1) or Section 148 nor the petitioner is guilty of not disclosing fully and truly all material facts. The assessment as observed supra for the year 2011-2012 has been made u/s 143(3) and the Assessing Officer has considered the case of the petitioner and held the petitioner entitled for carry forward of the loss. Mere change of opinion cannot be a ground to reopen the assessment - notice u/s 148 is quashed and set aside

Summary

Issues:
1. Validity of notice under Section 148 dated 27.03.2018 for reopening assessment made on 11.03.2014 for Assessment Year 2011-2012.
2. Interpretation of provisions of Section 139(1), Section 139(4), Section 72(3) of the Income Tax Act.
3. Whether failure to file return within the time allowed under Section 139(1) amounts to escapement of income chargeable to tax.
4. Consideration of grounds for reopening assessment under Section 147 of the Income Tax Act after four years.

Analysis:
1. The petitioner challenged the notice under Section 148 issued on 27.03.2018 to reopen the assessment made on 11.03.2014 for the Assessment Year 2011-2012. The notice was issued after four years, raising concerns about the validity of the reopening under Section 147 of the Income Tax Act.

2. The petitioner contended that the return filed on 31.03.2012 was within the time allowed under Section 139(4) of the Income Tax Act, permitting filing before the end of the assessment year. The petitioner relied on Section 72(3) for carrying forward losses for eight years. References were made to relevant case laws supporting the petitioner's position.

3. The respondents argued that failure to file a return within the time allowed under Section 139(1) could constitute a failure leading to reopening under Section 147, even after four years. Citing case law, the respondents emphasized that the Court need not delve into the merits of the notice at this stage, relying on the judgment of the Apex Court in Raymond Woollen Mills Ltd. Vs. Income Tax Officer.

4. The Court acknowledged that the notice under Section 148 was issued solely based on the petitioner's alleged failure to file a return within the due date under Section 139(1) for carrying forward business losses. However, it was established that the return was filed before the end of the assessment year, as permitted under Section 139(4), and no suppression or escapement of income chargeable to tax was evident. The assessment under Section 143(3) had already considered the petitioner's entitlement for loss carry forward, making the reopening unnecessary.

5. Ultimately, the Court quashed and set aside the impugned notice under Section 148, ruling in favor of the petitioner. The decision highlighted that mere change of opinion cannot be a valid ground for reopening an assessment, especially when the petitioner had complied with the relevant provisions of the Income Tax Act.

6. The Writ Petition was allowed with no costs, concluding the legal proceedings in favor of the petitioner based on the detailed analysis of the provisions and case laws presented during the hearing.