2019 (11) TMI 1306 - HC - Income Tax

Reopening of assessment u/s 147 - as alleged no failure on the part of the Assessee to disclose the truly and fully all facts necessary for assessment - change of opinion - HELD THAT - The reasons recorded in support of the impugned notice make no reference to any fresh tangible evidence but is based on examination of the record by the Assessing Officer. Thus prima-facie the impugned notice is hit by the proviso to Sections 147 of the Act. The reason to believe that income chargeable to tax has escaped assessment is two fold i.e. one the interest income ought to have been taxed as income from other sources and not as business income and second that the expenses debited under the head other expenses were disproportionate. Both these issues were not only disclosed by the Petitioner in its profit and loss account but were examined by the AO during the regular assessment proceedings. The same is evidenced according to the Petitioner by letter dated 3 August 2016 submitted during the regular assessment proceedings. However, the same is disputed by the Revenue. It may be pointed out that the AO has not disputed by affidavit the affidavit, of the Chartered Accountant who attended the hearing before the then Assessing Officer stating that he had submitted the letter giving these details to the Assessing Officer during the course of the hearing. Thus, prima-facie, the impugned notice appears to be without jurisdiction as there was no failure on the part of the Assessee to disclose the truly and fully all facts necessary for assessment and on account of change of opinion.

Summary

Issues:
Challenge to notice seeking to reopen assessment for Assessment Year 2013-14 under Section 143(3) of the Income Tax Act, 1961.

Analysis:
The petition challenges a notice dated 31 March 2019 aiming to reopen the assessment for Assessment Year 2013-14, completed under Section 143(3) of the Income Tax Act, 1961. The notice is beyond the four-year period from the end of the relevant assessment year. For the jurisdiction to issue such a notice, it must be proven that the petitioner failed to fully disclose all material facts necessary for assessment. The reasons recorded for the notice do not mention any fresh tangible evidence but are based on the Assessing Officer's examination of the record, potentially violating the proviso to Sections 147 of the Act. The notice alleges that interest income should have been taxed as income from other sources and not as business income, and that the expenses debited under other expenses were disproportionate. However, these issues were disclosed by the petitioner in its profit and loss account and examined during the regular assessment proceedings. The petitioner claims to have submitted a letter in this regard during the assessment proceedings, which the Revenue disputes. The Assessing Officer has not disputed the Chartered Accountant's affidavit stating that the letter was submitted during the hearing.

Prima facie, the impugned notice seems to lack jurisdiction as there was no failure on the part of the assessee to fully disclose all necessary facts for assessment and due to a potential change of opinion. Consequently, an interim stay has been granted in terms of the prayer clause.

The learned counsel for the respondents waived service, indicating their acceptance of the interim stay.