2023 (3) TMI 565 - HC - Income Tax

Reopening of assessment u/s 147 - depreciation allowance claimed by the Petitioner for the relevant assessment year had been examined by the AO and had been accepted after scrutiny - HELD THAT - Petitioner had disclosed all material facts for the Assessment Year 1997-98 including the transactions now referred to in the impugned notice under Section 148 of the Act. There was thus no foundational fact at all disclosed in the notice issued by the Respondent No.1 - Deputy Commissioner of Income Tax, Circle 2(2), Mumbai to assume jurisdiction to reopen the case of the Petitioner for Assessment Year 1997-98, more so to get over the bar of limitation of four years. The objections raised by the Petitioner in its reply dated 22.09.2004, that the reasons cited in the notice dated 22.03.2004 issued by the Respondent No.1 that the reopening was based upon a change of opinion without there being any sufficient cause for arriving at that conclusion is justified and correct. The reasons cited for rejection of the objections in the impugned order dated 04.03.2005, namely the reference to the specific transactions of sale and lease back for the Assessment Years 1996-97 and 1997-98 clearly do not constitute material to justify reopening of the assessment. As held the notice must stipulate that there was a failure on the part of the assessee to disclose fully and truly material facts necessary for its assessment and discovery of such new material, details of which are required to set out in the notice could be the only material to form the basis for assuming jurisdiction under Section 147 of the Act. In the present case, there is clearly a failure on the part of the Assessing Officer to set out such material that provided the basis for assumption of jurisdiction under Sections 147 and 148 of the Act. Decided in favour of assessee.

Summary

Issues Involved:
1. Legality of reopening assessment under Section 148 of the Income Tax Act, 1961.
2. Jurisdiction of the Assessing Officer to reopen assessment beyond four years.
3. Validity of the reasons provided for reopening the assessment.
4. Alleged failure to disclose material facts by the assessee.

Summary:

Legality of Reopening Assessment:
The petitioner challenged the notice dated 22.03.2004 issued under Section 148 of the Income Tax Act, 1961, and the subsequent order dated 04.03.2005 dismissing the petitioner's objections to reopening the assessment for the Assessment Year 1997-98. The court examined whether the reopening was permissible under the law, particularly when the original assessment was completed under Section 143(3) of the Act and all material facts were allegedly disclosed by the petitioner.

Jurisdiction of Assessing Officer:
The petitioner contended that reopening the assessment beyond four years from the end of the relevant assessment year was illegal, as there was no suppression of material facts. The court noted that the original assessment for the year 1997-98 was completed after scrutiny, and all relevant information was provided during the assessment process. The court emphasized that reopening an assessment after four years requires a failure on the part of the assessee to disclose fully and truly all material facts, which was not evident in this case.

Validity of Reasons for Reopening:
The court scrutinized the reasons provided by the Assessing Officer for reopening the assessment. The reasons cited were based on alleged paper transactions for the Assessment Year 1996-97, which were different from those in 1997-98. The court highlighted that the reasons must disclose new and tangible material not previously considered, which was absent in this case. The court referred to several judgments, including Hindustan Lever Ltd. and Ananta Landmark Pvt. Ltd., to underscore that the reasons must clearly indicate the material facts not disclosed by the assessee.

Alleged Failure to Disclose Material Facts:
The petitioner argued that all material facts were disclosed during the original assessment, including details of sale and lease back transactions. The court noted that the Tribunal had quashed the reopening for the Assessment Year 1996-97 on similar grounds, and no new material facts were presented to justify reopening for 1997-98. The court concluded that the reopening was based on a change of opinion, which is not permissible under the law.

Conclusion:
The court held that the notice dated 22.03.2004 and the order dated 04.03.2005 were without jurisdiction and unsustainable. The court quashed and set aside both the notice and the order, making the rule absolute in terms of the petitioner's prayers.