2019 (5) TMI 551 - HC - Income Tax

Reopening of assessment u/s 148 - payment of EPF contribution was not made in the prescribed time and added to the total income the aforesaid amount according to section 2(24)(x) read with section 36(1)(va) - deduction for belated payment of EPF contribution paid before due date of filing the return allowed in original assessment - HELD THAT - For any sum received by the assessee from any of his employees to which the provisions of subclause (x) of clause 24 of section 2 apply, deduction thereof can be allowed only if such sum is credited by the assessee to the employee's account in the relevant fund or funds on or before the due date as per the provisions of the Employees' Provident Fund Act. AO however, formed a belief that income has escaped assessment without considering the fact that the assessee has fully and truly disclosed all material facts which is evident from the impugned notice itself. Therefore, the Assessing Officer cannot issue notice under section 148 to reopen a concluded assessment i.e. scrutiny assessment u/s 143(3) of the Act beyond a period of four years in absence of existence of any tangible material outside of the existing record and in absence of failure on part of the petitioner to disclose truly and fully all material facts necessary for assessment for the relevant assessment year. Admittedly, no new fact is brought on record by the Assessing Officer and nor there is any failure on part of the petitioner to disclose fully and truly all material facts necessary for the relevant assessment year and, therefore, as per First Proviso to section 147 of the Act, Assessing Officer cannot assume jurisdiction. The record of the case shows that the respondent has called for all the details during the assessment proceedings including the tax audit report and computation of income which were duly submitted and were considered at the time of original assessment proceedings. Petitioner was claiming deduction for belated payment of Employee's Provident Fund contribution as it was paid before due date of filing the return. The petitioner also relied upon various decisions which were available at the relevant point of time for filing the return of income. Therefore, as all the relevant details called for were submitted and perused during the course of original assessment proceedings and the Assessing Officer after considering the same, accepts the claim of the petitioner. The respondent, therefore, now seeks to reopen the assessment on mere change of opinion, which is not permissible in law and on that count also the impugned notice cannot be sustained.- Decided in favour of assessee.

Issues Involved:
1. Validity of notice issued under Section 148 of the Income Tax Act, 1961 for reopening assessment.
2. Failure to disclose fully and truly all material facts necessary for assessment.
3. Jurisdiction of the Assessing Officer to issue the notice beyond four years.
4. Change of opinion as a basis for reopening assessment.

Issue-wise Detailed Analysis:

1. Validity of Notice Issued Under Section 148:

The petitioner challenged the notice dated 28.03.2018 issued under Section 148 of the Income Tax Act, 1961 for the Assessment Year 2011-2012. The petitioner argued that the notice was invalid as it was based on the tax audit report and computation of income already available on record, without any new or tangible material. The court observed that the Assessing Officer formed a belief that taxable income had escaped assessment based solely on the existing record, specifically the tax audit report, which indicated a delay in payment of Employees' Provident Fund (EPF) contributions. The court concluded that the notice was invalid as it did not bring any new facts on record and was based on a mere change of opinion.

2. Failure to Disclose Fully and Truly All Material Facts:

The petitioner contended that there was no failure to disclose fully and truly all material facts necessary for the assessment. The petitioner had submitted all required details, including the tax audit report and computation of income, during the original assessment proceedings. The fact that there was a delay in the payment of EPF contributions was clearly reflected in the tax audit report and notes forming part of the return of income. The court noted that the petitioner had disclosed all material facts, and the Assessing Officer had considered these facts during the original assessment. Therefore, the court held that there was no failure on the part of the petitioner to disclose fully and truly all material facts.

3. Jurisdiction of the Assessing Officer to Issue the Notice Beyond Four Years:

The petitioner argued that the Assessing Officer had no jurisdiction to reopen the assessment beyond four years, as there was no failure to disclose fully and truly all material facts. The court observed that as per the First Proviso to Section 147 of the Act, the Assessing Officer cannot assume jurisdiction to issue a notice under Section 148 to reopen a concluded assessment beyond four years in the absence of any tangible material outside the existing record. Since no new facts were brought on record and there was no failure to disclose material facts, the court held that the Assessing Officer lacked jurisdiction to issue the notice beyond the stipulated period.

4. Change of Opinion as a Basis for Reopening Assessment:

The petitioner contended that the reopening of the assessment was based on a mere change of opinion, which is not permissible in law. The court observed that the Assessing Officer had called for and considered all relevant details, including the tax audit report and computation of income, during the original assessment proceedings. The court noted that the Assessing Officer had accepted the petitioner's claim after considering all submitted details. The court held that reopening the assessment on the same set of facts, without any new material, amounted to a change of opinion, which is not permissible. Therefore, the court quashed the impugned notice on this ground as well.

Conclusion:

The court allowed the petition, quashing the impugned notice dated 28.03.2018 for the Assessment Year 2011-2012 and all subsequent consequential proceedings. The court held that the Assessing Officer could not reopen the assessment beyond four years in the absence of any new material and failure to disclose material facts. The reopening based on a mere change of opinion was also deemed impermissible. The rule was made absolute with no order as to costs.

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