2024 (2) TMI 469 - HC - Income Tax

Validity of Reopening of assessment - reasons for reopening were examined at the time of original assessment - notice issued after expiry of more than four years - HELD THAT - A bare perusal of the reasons recorded would show that there has been no failure on the part of Petitioner to truly and fully disclose material facts. Though the words failure on the part of assessee to disclose fully and truly all material facts necessary for assessment' have been used in the reasons recorded, those have been used only to get over the fetters placed by the proviso to Section 147 of the Act. Therefore, it is absolutely clear that the entire basis for forming a reason to believe there was escapement of income is from the records filed by Petitioner with return of income. It is a clear case of change of opinion which does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. After admitting that the issues involved as noted in the reasons for reopening were examined at the time of original assessment proceedings, it is stated that the factual error came to the notice of the AO subsequently, on the basis of which belief was formed that income chargeable to tax has escaped assessment. Apex Court in Gemini Leather Stores 1975 (5) TMI 1 - SUPREME COURT held that the assessment cannot be reopened by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts as the Income Tax Officer had material facts before him when he made the original assessment. The Court held that the Assessing Officer cannot take recourse to open to remedy the error resulting from his oversight in the assessment proceeding. As held by the Apex Court in Calcutta Discount Co. Ltd. v. ITO 1960 (11) TMI 8 - SUPREME COURT the duty of assessee does not extend beyond the full and truthful disclosure of all primary facts. Once all the primary facts are before him, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. Explanation to the sub-section has nothing to do with inferences and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income-tax Officer could have discovered them from the facts actually disclosed. The Explanation has not the effect of enlarging the section, by casting a duty on the assessee to disclose inferences to draw the proper inferences being the duty imposed on the Income-tax Officer. The Court held that the duty of the assessee is to disclose fully and truly all primary relevant facts and it does extend beyond that. We are satisfied that there has been no failure on the part of assessee to truly and fully disclose primary facts. Therefore, Rule made absolute

Summary

Issues involved:
The issues involved in the judgment are the challenge to the action of issuing a notice under Section 148 of the Income Tax Act, 1961 for reassessing income for Assessment Year 2015-16 and the rejection of objections to the notice by the Respondent.

Details of the Judgment:

Challenge to Notice under Section 148:
The Petitioner, engaged in shares and stock broking, challenged the issuance of a notice dated 31st March 2021 under Section 148 of the Income Tax Act, seeking to reassess income for AY 2015-16. An assessment under Section 143(3) of the Act was previously made, determining the total income. The proviso to Section 147 of the Act restricts reassessment after four years from the end of the relevant assessment year, unless there was a failure to disclose material facts. The reasons for reopening were based on records filed by the Petitioner with the return of income. The Court found no failure on the part of the Petitioner to disclose primary facts, leading to the allowance of the petition.

Change of Opinion and Justification:
The Respondent's claim of a factual error coming to notice subsequently, forming the basis for reopening, was deemed a clear case of change of opinion. The Apex Court rulings in Gemini Leather Stores v. ITO and Calcutta Discount Co. Ltd. v. ITO were cited, emphasizing that the duty of the assessee is to disclose all primary relevant facts, and once done, no further assistance is required. The Court held that the Petitioner had fulfilled this duty, and the assessment could not be reopened based on oversight or omission.

Decision and Relief Granted:
The Court allowed the petition, quashing the notice under Section 148 for AY 2015-16, the impugned order, notice for proposed variation, and consequential assessment order along with demand and penalty notices. The Court found no failure on the part of the Petitioner to disclose primary facts, leading to the relief granted in favor of the Petitioner.

Conclusion:
The judgment addressed the challenge to the notice under Section 148 of the Income Tax Act, emphasizing the importance of full and truthful disclosure of primary facts by the assessee. The Court ruled in favor of the Petitioner, highlighting the lack of justification for the reassessment based on a change of opinion and the absence of failure to disclose material facts.