2019 (12) TMI 216 - HC - Income Tax

Reopening of assessment u/s 147 r.w.s. 148 - Participation in the assessment proceedings after rejection of objections by the AO without challenging the order of rejection - change of opinion - time limitation - Before passing the assessment order the petitioner was not issued with notice under Section 142(1) - principles of natural justice - it is the specific allegation of the Revenue that the return filed by the assessee with regard to the date of audit report is with false information and that the return so filed is invalid one. Whether the impugned proceedings viz. the notice under Section 148 and the consequential assessment order passed under Section 143(3) read with Section 147 need to be interfered with by going into the merits of the matter when admittedly the petitioner has not questioned the order rejecting the objections filed by the petitioner against reopening? HELD THAT - In this case admittedly the petitioner has not questioned the order dated 29.09.2017 rejecting the objections. It is pertinent to note at this juncture that even in this writ petition the challenge made is against notice under Section 148 and the order of assessment. In between the order rejecting the objection stares at the petitioner which was not questioned. No doubt the petitioner while questioning the order of assessment can also question the reopening. But the forum of such change is relevant to be noted at this juncture - The petitioner has chosen to challenge the notice under Section 148 and the consequential assessment order by filing the present writ petition. The assessee has not chosen to challenge the rejection order on the other hand they participated in the assessment proceedings - the reasons for reopening and the consequential order rejecting the objections against those reasons now got merged with the subsequent order of assessment and therefore it would not be proper for this Court to go into the question of reopening alone and decide about its validity by exercising the jurisdiction of this Court under Article 226 of the Constitution of India. By going into such question if it is found that the reopening is valid this Court has to necessarily go into the merits of the assessment as well and find out as to whether the same can be sustained or not. It is well settled that in fiscal matters invoking the jurisdiction of this Court under Article 226 of the Constitution of India straight away to challenge the order of the Original Authority and not be encouraged and on the other hand the parties must be directed to resort to the statutory appellate remedy under the relevant statute. The assessee has quoted a wrong date viz. 29.09.2010 as the date of audit report not only in the original return but also in the revised return before reopening and also in the return filed in response to the notice issued under Section 148 - The assessee claims that it is an inadvertent mistake or clerical mistake. Assuming that it is a mistake committing the same mistake again and again prima facie does not appear to this Court as inadvertent when the assessee was fully aware of the fact that the date of audit report is 12.01.2011 and not 29.09.2010 as claimed in the returns filed. In fact while the original return was filed on 08.10.2010 admittedly the audit was not completed and a report was not available before the assessee. However they have chosen to indicate the date of audit report as 29.09.2010 while filing the original return on 08.10.2010. Therefore it is evident that the date of audit report furnished in the original return is not a true information or disclosure of material facts and therefore the reasons for reopening the assessment indicating that there is a failure on the part of the assessee to disclose truly and fully material facts cannot be stated as a reason without any basis. Whether the wrong committed by the assessee in referring to the date of audit report will certainly have a live link to say that the income has escaped assessment or not is to be considered by the next fact finding authority as this Court is not expressing any view on the said issue raised by the petitioner as it is fully convinced that this matter is to be agitated before the Appellate Authority not before this Court. Thus all the issues raised by the petitioner in this writ petition need to be raised only before the next fact finding Authority viz. Appellate Authority by filing a regular appeal which in turn shall consider the same and pass orders on merits and in accordance with law. This writ petition is disposed of by directing the petitioner to file regular appeal against the impugned order of assessment before the concerned Appellate Authority within a period of four weeks from the date of receipt of a copy of this order.

Summary

Issues Involved:
1. Reopening of assessment based on change of opinion.
2. Reopening barred by limitation.
3. Violation of principles of natural justice due to lack of notice under Section 142(1).
4. Validity of the reassessment order under Section 143(3) read with Section 147.
5. Maintainability of the writ petition without exhausting statutory appellate remedy.

Detailed Analysis:

1. Reopening of Assessment Based on Change of Opinion:
The petitioner argued that the reopening of the assessment was based on a change of opinion and not on any new material. The original assessment was completed on 13.03.2014, accepting the revised return filed on 05.02.2011. The petitioner contended that all material facts, including the tax audit report, were provided during the original assessment. The reassessment was initiated based on the same materials, which amounts to a change of opinion. The respondents countered that the petitioner provided false information regarding the date of the audit report, which was a material fact not fully and truly disclosed during the original assessment. The court noted that the reasons for reopening indicated a failure to disclose material facts fully and truly, justifying the reopening under Section 147.

2. Reopening Barred by Limitation:
The petitioner claimed that the reopening was barred by limitation as the notice under Section 148 was issued after four years from the end of the assessment year 2010-11. The respondents argued that the notice was issued within six years as per Section 149, and the reopening was valid because the petitioner did not disclose the date of the audit report correctly. The court found that the reopening was within the permissible time limit and justified due to the incorrect disclosure of the audit report date.

3. Violation of Principles of Natural Justice Due to Lack of Notice Under Section 142(1):
The petitioner argued that the reassessment order was passed without issuing a notice under Section 142(1), thus violating the principles of natural justice. The respondents maintained that sufficient opportunity was provided, and the petitioner did not respond to the notice under Section 143(2). The court observed that the petitioner participated in the assessment proceedings and did not challenge the order rejecting the objections to reopening. Therefore, the principles of natural justice were not violated.

4. Validity of the Reassessment Order Under Section 143(3) Read with Section 147:
The petitioner contended that the reassessment order was invalid due to the incorrect date of the audit report being a typographical error. The respondents argued that the incorrect date was a false statement, and the reassessment was justified. The court held that the incorrect date of the audit report indicated a failure to disclose material facts fully and truly, justifying the reassessment. The court also noted that the petitioner did not challenge the order rejecting the objections to reopening and participated in the reassessment proceedings.

5. Maintainability of the Writ Petition Without Exhausting Statutory Appellate Remedy:
The respondents argued that the writ petition was not maintainable as the petitioner had not exhausted the statutory appellate remedy. The petitioner contended that the writ petition was maintainable as it challenged the reopening of the assessment. The court held that the petitioner should have challenged the reopening at the appropriate time before the assessment order was passed. The court directed the petitioner to file a regular appeal against the assessment order before the appellate authority within four weeks and raise all contentions in the appeal.

Conclusion:
The court disposed of the writ petition, directing the petitioner to file a regular appeal before the appellate authority. The appellate authority was instructed to consider the appeal on its merits, including the challenge to the reopening, without being influenced by the court's observations. The court emphasized that the petitioner must exhaust the statutory appellate remedy before seeking relief under Article 226 of the Constitution of India.