2019 (12) TMI 1210 - HC - Income Tax

Reopening of assessment u/s 147 - reopening after four years - Bogus purchases - HELD THAT - The reasons supplied along with the impugned notice contain no assertion there was any failure of the petitioner to disclose fully and truly all material facts necessary for the assessment. This omission can be a ground to set aside the Reassessment notice. Pursuant to the reasons given along with first reopening notice Petitioner had supplied all the material regarding the very same allegations against the Petitioner and the same were examined by the AO. All the material was placed before the Assessing Officer by the Petitioner. Acting upon this material, the Assessing Officer had, in fact, made certain additions. Therefore, it cannot be said that there was a failure by the Petitioner to disclose all material facts fully and truly. In the circumstances, the jurisdictional requirement to reopen the assessment proceeding after four years is not present. Neither it has been alleged. In the reasons supplied along with first reopening notice, the issue of bogus accommodation of entries regarding purchases was discussed. The reasons given for second reopening notice reproduced above also refer to the said fact. The reasons also refer to a decision of the Supreme Court in the case of M/s.N.K.Proteins Ltd. 2017 (1) TMI 1090 - SC ORDER Even this decision was before the Assessing Officer in the proceeding pursuant to first reopening notice. The Petitioner, along with its objections, placed explanatory note as to how the said decision of the Supreme Court in M/s.N.K.Proteins did not apply to the facts of the case. Therefore, this aspect was also considered when the proceeding under the first reopening notice was conducted. In the circumstances, the contention of the Petitioner that the impugned reopening notice is issued only on mere change of opinion will have to be accepted. Since we are satisfied that the jurisdictional requirements for reopening of the assessment of the Petitioner for the assessment year 2012-13 after four years are absent, and the action of the Respondent No.1- Assessing Officer is without jurisdiction, the Petitioner is entitled to succeed.

Summary

Issues:
1. Reopening of assessment for the assessment year 2012-13 based on alleged bogus purchases and accommodation entries.
2. Jurisdictional requirements for reopening assessment after four years.
3. Failure to disclose fully and truly all material facts necessary for assessment.
4. Allegation of change of opinion by the Assessing Officer in issuing the reopening notice.

Analysis:
1. The Petitioner, a partnership firm in the diamond manufacturing and export business, filed its return for the assessment year 2012-13. The Assessing Officer sought details on purchases, sundry creditors, and sundry debtors. An assessment order was passed without disallowances. Subsequently, a notice was issued seeking to reopen the assessment based on alleged purchases of bogus bills without delivery of goods from specific parties. The Assessing Officer disallowed certain purchases as bogus after considering the Petitioner's response.

2. The impugned notice issued under section 148 of the Income Tax Act for reopening the assessment highlighted alleged involvement in taking bogus accommodation entries from specific entities. The Assessing Officer determined assessed income after disallowances. The Petitioner objected, leading to the present writ petition challenging the reopening of assessment after four years.

3. The jurisdictional requirement for reopening assessments after four years is crucial. The first proviso to section 147 of the Act mandates that no action can be taken if income escaped assessment due to the assessee's failure to disclose all material facts fully and truly. The Petitioner argued that there was no such failure, and the reasons supplied for reopening did not mention it. The Court agreed, stating that all material was disclosed previously, and the reopening lacked jurisdictional requirements.

4. The Petitioner contended that the second reopening notice was based on the same foundation as the first notice, indicating a change of opinion by the Assessing Officer. The Court found merit in this argument, noting that the issue of bogus purchases and accommodation entries was previously considered, and the second notice lacked new grounds. Consequently, the Court held that the reopening was without jurisdiction, allowing the writ petition and quashing the impugned notices.

This detailed analysis of the judgment from the Bombay High Court showcases the legal intricacies involved in challenging the reopening of assessments based on alleged discrepancies in financial transactions.