2024 (8) TMI 364 - HC - Income Tax

Validity of reopening of assessment u/s 147 - notice issued more than four years after the expiry of the relevant assessment year and assessment proceedings u/s 143(3) - HELD THAT - Reasons for reopening of assessment makes it clear that the basis for reasons to believe are the financials of petitioner company - As by no stretch of imagination, it can be stated that there has been failure on the part of the assessee to truly and fully disclose material facts. Therefore, the reopening notice issued u/s 148 of the Act cannot be sustained and is hereby quashed and set aside. Decided in favour of assessee.

Summary

Issues:
Impugning notice under Section 148 of the Income Tax Act, 1961 for Assessment Year 2015-2016, rejection of objections, and issuance of notice under Section 142(1) of the Act.

Analysis:
The petitioner challenged a notice dated 30th March 2021 issued under Section 148 of the Income Tax Act, 1961, for Assessment Year 2015-2016. The High Court noted that the notice was issued more than four years after the relevant assessment year had ended, and assessment proceedings were completed earlier. The Court highlighted that the proviso to Section 147 of the Act applies, barring reopening unless there is a failure to disclose material facts. The reasons for reopening were based on the financials of the petitioner company, including discrepancies in investments, utilization of funds, disallowance of interest, and routing of transactions. The Court analyzed each reason in detail, emphasizing the lack of evidence of failure to disclose material facts by the assessee.

The Court specifically examined the reasons for reopening, which highlighted various financial discrepancies in the petitioner company's operations during the relevant assessment year. These included excess investments, improper utilization of funds, disallowance of interest, incorrect adjustments in disallowances, and irregular routing of transactions. The Court scrutinized each aspect raised in the reasons, emphasizing the need for concrete evidence of failure to disclose material facts for a valid reopening under the Act.

After a thorough analysis of the reasons provided for reopening the assessment, the Court concluded that there was no substantial failure on the part of the assessee to fully and truly disclose material facts. Consequently, the Court quashed and set aside the reopening notice dated 30th March 2021 issued under Section 148 of the Act. The judgment highlighted the importance of establishing a clear failure to disclose material facts for validly reopening assessments, which was not substantiated in this case. The petition was disposed of accordingly, in favor of the petitioner.