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2020 (2) TMI 839 - HC - Income TaxReopening of assessment u/s 147 - Period of limitation u/s 149 - jurisdiction of income tax officer to issue notice - rejection of the objection of the petitioner - HELD THAT - It cannot be said that the notice issued under Section 148 of the Income Tax Act, 1961 was without jurisdiction. However, if an order is passed by the assessing officer under Section 147 of the Income Tax Act, 1961 contrary to the well-settled principles of law or despite true and full disclosure of all material facts necessary for the assessment, such order would be liable to be quashed. At the same time, if in the course of such reassessment, the 2nd respondent assessing officer finds any other reasons for justifying reopening of the assessment on some other point, he may do so. Such exercise cannot be stifled under Article 226 of the Constitution of India. Otherwise, the Court would be rendering the Explanation III of the Income Tax Act, 1961, redundant which is not intended. At the same time, confirmation of tax in the course of re-assessment under Section 147 of the Income Tax Act, 1961 has to again satisfy the well-settled principles of law i.e only if there was a failure on the part of the assessee to truly and fully disclose, all material facts that was required at the time of original assessment. No merits in interfering with the reassessment procedure hitherto undertaken by the 2nd respondent assessing officer. At the same time, it is made clear that while passing orders under Section 147 of the Income Tax Act, 1961, the 2nd respondent assessing officer will have to pass an appropriate order on merits considering the decision of the Hon'ble Supreme Court rendered in Commissioner of Income Tax and Another Vs. M/s. Yokogawa India Ltd. 2011 (8) TMI 845 - KARNATAKA HIGH COURT and the other well-settled principles of law. It is made clear that the order to be passed cannot be based on change of opinion if there was true and full disclosure by the Petitioner at the time of filing of the return. Writ Petition disposed by directing the Petitioner to participate in the adjudicatory mechanism before the concerned Respondent. The respondent shall pass appropriate orders after considering the submission of the Petitioner and after taking note of the decisions of the Hon'ble Supreme Court.
Issues Involved:
1. Jurisdiction of invoking Section 148 of the Income Tax Act, 1961. 2. Compliance with the principles of law established by higher courts. 3. Validity of reassessment proceedings under Section 147 of the Income Tax Act, 1961. 4. Application and interpretation of Section 149 of the Income Tax Act, 1961. Detailed Analysis: 1. Jurisdiction of invoking Section 148 of the Income Tax Act, 1961: The petitioner challenged the notice issued under Section 148, asserting that it was without jurisdiction. The petitioner had filed regular returns under Section 139, and a regular assessment was completed. The petitioner argued that the reasons provided for invoking Section 148 were contrary to the decisions of higher courts, specifically citing the Karnataka High Court's decision in Commissioner of Income Tax Vs. Yokogawa India Ltd., which was upheld by the Supreme Court. 2. Compliance with the principles of law established by higher courts: The petitioner referenced several judicial precedents, including the Supreme Court's decision in Commissioner of Income Tax Vs. Kelvinator of India Ltd., which emphasized that the assessing officer must have "reason to believe" that income has escaped assessment and that this belief must be based on new material facts not previously considered. The petitioner argued that the reassessment was contrary to these established principles. 3. Validity of reassessment proceedings under Section 147 of the Income Tax Act, 1961: The court examined the conditions under which reassessment proceedings could be initiated: - Reassessment is valid if the original income return was processed under Section 143(1) without scrutiny. - Reassessment is invalid if the issue was already decided in favor of the assessee in the original assessment. - Reassessment is invalid if an issue was raised and answered during the original assessment but no addition was made. The court noted that if the assessment order is erroneous and prejudicial to the interest of the Revenue, the proper remedy is to invoke Section 263, not reassessment. 4. Application and interpretation of Section 149 of the Income Tax Act, 1961: The court clarified that Section 148 could be invoked within four years, or up to six or sixteen years under specific conditions. The court emphasized that the formation of "reason to believe" and the recording of reasons are imperative before reopening an assessment. The court also highlighted that the reopening of an assessment must adhere to the proviso of Section 147, which restricts action after four years unless there was a failure to disclose fully and truly all material facts. Conclusion: The court concluded that the notice under Section 148 was not without jurisdiction. However, any order passed under Section 147 must comply with the well-settled principles of law and cannot be based on a change of opinion if there was full and true disclosure initially. The court directed the petitioner to participate in the reassessment process and allowed the respondent to pass appropriate orders on merits, considering the Supreme Court's decisions and other legal principles. The reassessment should be completed within three months, with the petitioner being given an opportunity to present their case. The writ petition was disposed of with these observations, and no costs were awarded. The connected miscellaneous petition was also closed.
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