2020 (2) TMI 995 - HC - Income Tax

Reopening of assessment - eligibility of reason to believe - Reopening notice after four years - Violation of provisions of Section 80IB - HELD THAT - In order to sustain a notice seeking to reopen assessment beyond normal period of 4 years, it is necessary for the Respondents to establish, at least, prima facie that there was failure to disclose fully and truly all material facts necessary for the assessment for that assessment year. In the facts of the present case, the Respondents have failed to establish this precondition even prima facie. Rather, the material on record establishes that there were full and true disclosures of all material facts necessary for the assessment of the Petitioner for the Assessment Year 2012-13. Despite this, the impugned notice seeking to reopen the assessment for the Assessment Year 2012-13 has been issued beyond the normal period of 4 years. According to us, on this short ground the impugned notice dated 29th March, 2019 and the impugned order dated 17th December, 2019 are required to be quashed and set aside. There is absolutely no reference to any alleged material facts which the Petitioner failed to disclose in the course of the assessment proceedings. Rather, the impugned notice refers to the list, as well as the letter issued by the Petitioner itself, which is sought to be made basis for reopening of the assessment. In this case, it is apparent that all the primary facts were disclosed by the Petitioner. In fact, the Petitioner had disclosed truly and fully all the material facts and it was open to the AO to take the same into account in the course of the assessment proceedings or, in any case, it was open to the AO to issue notice for reassessment within normal period of 4 years from the date of assessment. We allow the present Petition and quash and set aside the impugned notice - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Jurisdiction of the Assessing Officer (AO) to issue the notice based on the alleged failure to make true and full disclosures.
3. Applicability of the limitation period for reassessment under Section 147 of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Validity of the Notice Issued Under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 29th March 2019, issued under Section 148 of the Income Tax Act, 1961, and the subsequent order dated 17th December 2019, disposing of the petitioner’s objections to the reopening of the assessment. The petitioner argued that true and complete disclosures were made during the original assessment proceedings, and the AO had no jurisdiction to issue the notice merely based on a change of opinion. The petitioner cited several cases, including Mrs. Parveen P. Bharucha vs. The Deputy Commissioner of Income Tax Circle 2, Zuari Foods and Farms Pvt. Ltd. vs. Asst. Commissioner of Income-Tax, and Bombay Stock Exchange Ltd. vs. Deputy Director of Income-Tax (Exemption), to support the contention that the AO lacked jurisdiction for reopening the assessment.

2. Jurisdiction of the Assessing Officer (AO) to Issue the Notice Based on the Alleged Failure to Make True and Full Disclosures:
The respondents argued that the petitioner admitted to violating Section 80IB of the IT Act and failed to make true and full disclosures, justifying the issuance of the notice. However, the court found that the petitioner had disclosed all material facts, including a list of flat owners and potential breaches of Clause 10(f) of Section 80IB, during the original assessment proceedings. The court noted that mere bald assertions of non-disclosure without specific details were insufficient to justify reopening the assessment. The court emphasized that the requirement of full and true disclosure was met, and the AO's assertion lacked substantiation.

3. Applicability of the Limitation Period for Reassessment Under Section 147 of the Income Tax Act, 1961:
The court highlighted that the normal limitation period for reassessment under Section 147 is four years. However, if the assessee fails to disclose fully and truly all material facts, reassessment can be made beyond this period. In this case, the court found that the petitioner had made full and true disclosures, and the respondents failed to establish any prima facie failure to disclose material facts. Consequently, the notice issued beyond the four-year period was deemed invalid. The court relied on previous judgments, including Mrs. Parveen P. Bharucha and Zuari Foods and Farms Pvt. Ltd., to support this conclusion.

Conclusion:
The court concluded that the notice dated 29th March 2019 and the order dated 17th December 2019 were invalid due to the lack of jurisdiction and failure to establish non-disclosure of material facts by the petitioner. The court quashed the impugned notice and order, making the rule absolute in favor of the petitioner. The court's decision was based on the principles of full and true disclosure and the limitation period for reassessment under the Income Tax Act, 1961.