2008 (2) TMI 146 - HC - Income Tax

Reassessment no suppression on part of assessee in providing necessary material to assessing officer - AO raised specific queries on several occasions & all queries were answered - Once all the material was before the AO and he chose not to deal with the several contentions raised by the petitioner in his final assessment order, it cannot be said that he had not applied his mind Explanation to sec. 147 was not applicable reassessment notice after 4 years not valid

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act.
2. Whether there was a failure to disclose fully and truly all material facts necessary for assessment.
3. Applicability of the proviso to Section 147 of the Income Tax Act.
4. Whether the reopening of the assessment was based on a mere change of opinion.

Detailed Analysis:

1. Validity of the Notice Issued Under Section 148 of the Income Tax Act:

The petitioner challenged the notice dated 26.3.2007 issued by respondent no.1 under Section 148 of the Income Tax Act, which sought to reopen the petitioner's assessment for the assessment year 2001-2002. The petitioner also contested the subsequent order dated 13.12.2007, which rejected the objections raised by the petitioner to the reopening of the assessment.

2. Whether There Was a Failure to Disclose Fully and Truly All Material Facts Necessary for Assessment:

The petitioner argued that they had made a full and true disclosure of all material facts necessary for the assessment. The petitioner had disclosed the amalgamation details in the return filed on 30.10.2001, including the creation of an amalgamation reserve of Rs.9984.15 lakhs. The petitioner had also responded to several queries raised by respondent no.1 regarding this issue during the initial assessment process. The court found that there was no failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment.

3. Applicability of the Proviso to Section 147 of the Income Tax Act:

The petitioner contended that the proviso to Section 147 was applicable, which restricts the reopening of an assessment after four years from the end of the relevant assessment year unless there was a failure to disclose fully and truly all material facts necessary for the assessment. Since the assessment year in question was 2001-2002 and the notice under Section 148 was issued in 2007, more than four years had elapsed. The court agreed with the petitioner's contention, noting that all material facts had been disclosed and there was no suppression of any material from the assessing officer.

4. Whether the Reopening of the Assessment Was Based on a Mere Change of Opinion:

The petitioner argued that the reopening was based on a mere change of opinion, which is not permissible. The court noted that the assessing officer had raised specific queries regarding the amalgamation reserve during the original assessment, and the petitioner had provided detailed responses. The court held that once all the material was before the assessing officer and he chose not to deal with the contentions in his final assessment order, it could not be said that he had not applied his mind. Therefore, the reopening of the assessment was indeed based on a mere change of opinion.

Conclusion:

The court concluded that the pre-requisite conditions contained in the proviso to Section 147 for reopening the assessment after four years had not been met. The court also found that explanation-1 to Section 147, which pertains to the production of account books or other evidence, was not applicable in this case as specific queries were raised and answered. Consequently, the court allowed the writ petition, quashing the notice issued under Section 148 and the subsequent order rejecting the petitioner's objections. There was no order as to costs.

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