2021 (12) TMI 1090 - HC - Income Tax

Reopening of assessment u/s 147 - Notice issued after the expiry of four years - addition u/s 14A - HELD THAT - No indication that there was any failure on the part of petitioner to truly and fully disclose any material fact. Simply using the words as there is a failure on part of assessee to disclose fully and truly all material facts necessary for its assessment during the year under consideration would not help. These are nothing but bald averments. A failure has to be spelt out in the reasons recorded. Respondents have failed in that. The entire basis for reopening is that provisions of Section 14A and Rule 8D with regard to dividend income was attracted but while completing the scrutiny assessment no mention is made for the same. During the assessment proceedings, after petitioner filed its revised return of income on 29th March 2014, respondent no.1 issued notice under Section 142(1) of the said Act on 17th September 2014. Among other queries, respondent no.1 specifically inquired about the details of dividend income earned and computation of expenses incurred on earning this income as per the provisions of Rule 8D. Petitioner, in its reply dated 24th September 2014 to the notice issued under Section 142(1) of the said Act, has specifically addressed the query with regard to dividend income. Petitioner has stated that the amount of dividend income is exempt so it is not included in computation as taxable income. As far as Rule 8D was concerned, petitioner has submitted that the company is taxable as per the tonnage tax scheme and thereby, it is not claiming any expenditure, viz.-aviz., the exempt income and hence, Rule 8D was not applicable. After considering these submissions of petitioner, the original assessment order under Section 143(3) of the said Act was passed on 28th January 2015. Respondent no.1 has, therefore, applied his mind with regard to petitioner's dividend income while passing the assessment order under Section 143(3) for Assessment Year 2012-2013. We find that the notice has been issued without proper jurisdiction. It is not permissible for respondents to change its opinion based on the same set of facts. In our view, this petition has to be allowed and is hereby allowed - Decided in favour of assessee.

Summary

Issues:
Impugning a notice under Section 148 of the Income Tax Act, 1961 and order rejecting objections - Failure to disclose all material facts - Jurisdictional aspect of reopening assessment.

Analysis:
1. The petitioner challenged a notice dated 11th March 2019 issued under Section 148 of the Income Tax Act, 1961, and an order dated 28th October 2019 rejecting the objections raised. The notice for Assessment Year 2012-2013 was issued after the expiry of four years from the relevant assessment year. As the scrutiny assessment under Section 143(3) had been completed, the proviso to Section 147 applied, requiring the respondents to demonstrate a failure on the part of the petitioner to disclose all material facts.

2. The Court examined the reasons provided and found no indication of any failure on the petitioner's part to fully disclose material facts. Mere assertions of failure without specific details are insufficient. The reopening was based on Section 14A and Rule 8D concerning dividend income, but these were not mentioned during the scrutiny assessment. The petitioner had addressed queries related to dividend income and Rule 8D during the assessment proceedings, stating that dividend income was exempt and Rule 8D was not applicable due to the tonnage tax scheme.

3. Despite the petitioner's submissions, the original assessment order under Section 143(3) was passed after considering the dividend income. The Court concluded that the notice was issued without proper jurisdiction. The respondents cannot change their opinion based on the same facts, and the petition was allowed, quashing the impugned notice to reopen the assessment for the year 2012-2013.

4. Referring to a judgment, the Court emphasized the necessity of a clear indication of failure to disclose material facts in the reasons provided for reopening assessments. Without such indication, the assumption of jurisdiction under Sections 147 and 148 would exceed the legal restraints. The Court clarified that the decision was limited to the jurisdictional aspect and did not delve into the case's merits.

5. In conclusion, the petition was disposed of, emphasizing that the Court had focused on the jurisdictional aspect of issuing the notice under Section 148 without delving into the case's merits.