2022 (8) TMI 1192 - HC - Income Tax

Validity of Reopening of assessment u/s 147 - assessment is reopened after 4 years but within 6 years under the provisions of Section 143(3) - deduction u/s 35(1)(iv) disallowed - HELD THAT - Assessment is not reopened on the allegation that there is no true and full disclosure by the assessee. In fact, it is not the case of the respondent-authority at all. Their case is that the claim of deduction under Section 35(1)(iv) of the Income Tax Act as claimed by the petitioner was wrongly granted. The revenue is not in a position to dispute the aforementioned facts. In the instant case, for the aforementioned reasons, the reopening of assessment for the assessment years 2011-12 and 2012-13 and authorities assuming jurisdiction for the same has to be held invalid. Under the given facts and circumstances of the case, the writ petition deserves to be allowed on this preliminary ground itself. There is no necessity to examine the other contentions raised by petitioner. Thus issued under Section 148(1) is set aside. - Decided in favour of assessee.

Summary

Issues:
1. Reopening of assessment for assessment years 2011-12 and 2012-13 after 4 years but before 6 years from the last date of the relevant assessment years.
2. Challenge to the notice issued under Section 148(1) of the Income Tax Act, rejection of objections, and initiation of reassessment proceedings.
3. Allegation of income escaping assessment due to disallowed deductions under Section 35(1)(iv) of the Income Tax Act.
4. Interpretation of Section 147 and Section 149 of the Income Tax Act.
5. Validity of reopening assessments without alleging failure to disclose material facts.

Analysis:

1. The petitioner challenged the reopening of assessments for the years 2011-12 and 2012-13 under Section 148(1) of the Income Tax Act. The notices were issued after 4 years but before 6 years from the relevant assessment years. The petitioner objected to the reopening, citing full and true disclosure in its returns.

2. The petitioner filed writ petitions challenging the notices under Section 148(1), rejection of objections, and initiation of reassessment proceedings for the assessment years 2011-12 and 2012-13. The petitioner contended that it had consistently disclosed all necessary particulars in its returns.

3. The case revolved around disallowed deductions claimed under Section 35(1)(iv) of the Income Tax Act for the assessment years in question. The revenue authorities alleged that the deductions were not permissible, leading to income escaping assessment and subsequent reassessment proceedings.

4. The judgment referred to Section 147 and Section 149 of the Income Tax Act, emphasizing the importance of the Assessing Officer establishing failure to disclose material facts for reopening assessments. It cited a High Court ruling highlighting the necessity for clear and unambiguous reasons for reopening assessments.

5. The Court found that the assessments were reopened without alleging any failure on the part of the petitioner to disclose material facts. The reasons provided for reopening were related to disallowed deductions, not lack of disclosure. Consequently, the Court held the reopening of assessments invalid and set aside the notices and orders issued by the revenue authorities.

In conclusion, the Court's detailed analysis focused on the necessity of establishing non-disclosure of material facts for validly reopening assessments under the Income Tax Act. The judgment emphasized the importance of clear and unambiguous reasons for initiating reassessment proceedings, ultimately ruling in favor of the petitioner due to the absence of allegations regarding inadequate disclosure.