2022 (10) TMI 356 - HC - Income Tax

Reopening of assessment u/s 147 - Non disclosure of reasons for reopening of assessment - Denial of natural justice - HELD THAT - No doubt, under Section 148 notice, the minimum statement is enough, where, the detail as to how the Assessing Officer concerned has reason to believe that there has been an escaped assessment, need not be disclosed. But, in the communication giving reasons for re-opening, it should have been stated. Moreover, in the rejection order when this reason was specifically objected to, that should have been also dealt with by giving reasons as to why the objection raised by the petitioner against the limitation i.e., beyond four years up to six years has to be rejected. In the absence of any such reasons stated in the rejection order on the specific objection raised in this regard by the petitioner, this Court feel that even that rejection order may not be justifiable as it is not in the expected line within the meaning of the provisions of law as well as the decision made by the law Courts. Therefore, this Court feels that in order to rectify these violations or mistakes before proceeding further in the Section 147 proceedings, the matter can be remitted back to the respondent. This Court is inclined to dispose of this writ petition with the following order That the impugned order is set aside and the matter is remitted back to the respondent for reconsideration. While reconsidering the same, the objection given by the petitioner shall be considered objectively by the respondent / assessing authority within the parameters as has been indicated especially in the context of first proviso to Section 147 and also the law laid down in Schwing Stetter India (P) Ltd. 2015 (6) TMI 497 - MADRAS HIGH COURT case. After having considered the same, a reasoned order shall be passed meeting this point discussed above and any other possible ground to be raised or urged by the petitioner. Depending upon such order to be passed considering the objections and still the assessing authority believes that he has reason to proceed under Section 147, it is open to them to act accordingly.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act.
2. Limitation period for issuing notice under Section 148.
3. Requirement for recording reasons to believe for escaped assessment.
4. Consideration of objections raised by the petitioner.

Detailed Analysis:

1. Validity of the Notice Issued under Section 148:
The petitioner challenged the notice issued under Section 148 of the Income Tax Act for the Assessment Year 2014-15, arguing that it was issued beyond the permissible limitation period and without proper reasons to believe that income had escaped assessment. The court noted that the notice dated 30.03.2021 was issued after the expiry of four years from the end of the relevant assessment year, which is a critical factor in determining its validity.

2. Limitation Period for Issuing Notice under Section 148:
The petitioner contended that the notice was issued beyond the four-year limitation period specified under the unamended Section 147 of the Act. The court acknowledged that the limitation period is crucial and highlighted that the notice was indeed issued beyond the four-year period, which ended on 31.03.2019. However, the Revenue argued that the case falls under the fourth limb of the proviso to Section 147, which allows for an extended limitation period of six years if there is a failure to fully and truly disclose all material facts necessary for assessment.

3. Requirement for Recording Reasons to Believe for Escaped Assessment:
The court emphasized that for the extended limitation period to apply, the Assessing Officer must record specific reasons to believe that income had escaped assessment due to the assessee's failure to disclose material facts fully and truly. The petitioner argued that the Assessing Officer did not record such reasons, as mandated by law. The court referred to the Division Bench decision in Commissioner of Income-tax, Chennai Vs. Schwing Stetter India (P) Ltd., which held that the failure to record such reasons renders the notice without jurisdiction.

4. Consideration of Objections Raised by the Petitioner:
The petitioner had raised detailed objections against the initiation of proceedings under Section 147, which were rejected by the respondent through an order dated 03.01.2022. The court found that the specific objections regarding the limitation period and the lack of recorded reasons were not properly considered in the rejection order. The court noted that the reasons provided by the Assessing Officer in the notice dated 23.08.2021 did not adequately explain why there was a belief that income had escaped assessment due to non-disclosure of material facts.

Conclusion:
The court concluded that the notice issued under Section 148 and the subsequent rejection order were not justifiable within the meaning of the law. The court set aside the impugned order dated 03.01.2022 and remitted the matter back to the respondent for reconsideration. The respondent was directed to objectively consider the objections raised by the petitioner, particularly in the context of the first proviso to Section 147 and the law laid down by the Division Bench in Schwing Stetter India (P) Ltd., case. A reasoned order should be passed addressing the points discussed and any other grounds raised by the petitioner. Depending on the outcome, the assessing authority may proceed under Section 147 if they still believe there is a reason to do so.

Disposition:
The writ petition was disposed of with the above observations and directions, and the connected miscellaneous petitions were closed.