2024 (9) TMI 153 - HC - Income Tax

Reopening of assessment - notice being issued beyond four years - assessee has failed to disclose any break up of work in progress or direct construction cost and therefore, there is a failure on the part of the petitioner to fully and truly disclose the material facts - HELD THAT - As it is not in dispute that during the regular course of assessment, the AO has sought for the details of the land cost which was furnished by the petitioner in reply and after considering the same, assessment order dated 01.09.2024 was passed u/s 143 (3) of the Act. In view of the above undisputed facts on both counts of change of opinion as well as the impugned notice being issued beyond four years from the end of the relevant assessment year, AO could not have assumed the jurisdiction to have reason to believe that the income has escaped assessment as there is no failure on the part of the petitioner to disclose truly and fully all material facts for the assessment. Decided in favour of assessee.

Summary

Issues:
Challenge to notice under section 148 of the Income Tax Act, 1961 for reopening assessment for the Assessment Year 2012-13.

Analysis:
The petitioner, a Partnership Firm, challenged a notice dated 27.03.2019 issued under section 148 of the Income Tax Act, 1961, for reopening the assessment for the Assessment Year 2012-13. The petitioner had filed a return of income for the said year, which was taken up for scrutiny by the Assessing Officer. The assessment was completed under section 143 (3) of the Act on 01.09.2014, determining the total income. However, the respondent issued the impugned notice under section 148, alleging an escapement of income due to the petitioner not including the cost of land related expenditure in the construction cost, resulting in underassessment. The petitioner objected to the notice, arguing that it was issued beyond the four-year period and was based on a change of opinion. The petitioner contended that the land cost was already reflected in the audited balance sheet as stock-in-trade. The respondent, on the other hand, argued that there was a failure on the part of the petitioner to fully disclose material facts during the original assessment proceedings. The Court noted that the petitioner had provided the details of land cost during the regular assessment, and there was no failure to disclose material facts. Consequently, the Court held in favor of the petitioner, quashing the impugned notice.

In conclusion, the Court found that there was no failure on the part of the petitioner to disclose all material facts during the original assessment proceedings. The impugned notice under section 148 of the Act was deemed invalid as it was issued beyond the prescribed period and on the basis of a change of opinion. Therefore, the petition was allowed, and the notice dated 25.07.2014 was quashed and set aside. No costs were awarded in the matter.