2025 (2) TMI 582 - HC - Income Tax

Reopening of assessment u/s 147 - Notice after expiry of period of 4 years from the end of the relevant assessment order - HELD THAT - As per the first proviso of Section 147 re-assessment proceedings cannot be initiated after period of 4 years from the end of the relevant assessment year unless there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. In the case of Hindustan Unilever Limited 2004 (2) TMI 41 - BOMBAY HIGH COURT has held that there has to be not only the allegation that there is a failure on the part of the assessee to disclose fully and truly all material facts but the reasons should also state what are the material facts which were not disclosed. On a perusal of the reasons recorded in the present case we do not find any allegation of any failure to disclosure fully and truly of material facts necessary in the assessment. But on the contrary on a perusal of the reasons recorded it shows that the information on the basis of which re-opening is sought was based on the documents filed by the petitioner alongwith the return of income and in the assessment proceeding. Therefore on this short ground itself the impugned proceedings are required to be quashed and set aside. If a query is raised and the assessee files its reply and the issue form subject matter of the assessment order there can be no question of any failure to disclose fully and truly all material facts but on the contrary allowing the respondents to pursue the present proceeding would amount to empowering power of review on respondents which the Act does not provide and which is not permissible under the Act. Therefore even on this ground the impugned proceedings are required to be quashed and set aside.

The High Court of Bombay considered a petition challenging a notice issued under Section 148 of the Income-tax Act, 1961 for the assessment year 2014-15. The key legal issues presented and analyzed in the judgment are as follows:Issues Presented and Considered:1. Whether the notice under Section 148 of the Income-tax Act, 1961 is valid despite being issued after the expiry of the 4-year period from the end of the relevant assessment year.2. Whether there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, justifying the re-opening of the assessment.Issue-wise Detailed Analysis:Relevant Legal Framework and Precedents:- Section 147 of the Income-tax Act, 1961 provides for the procedure for reassessment.- The first proviso to Section 147 imposes a limitation of 4 years for initiating reassessment proceedings unless there is a failure to disclose fully and truly all material facts.- Precedents such as Hindustan Unilever Limited v. R.B. Wadkar (2004) 268 ITR 332 were cited regarding the requirement of disclosing material facts for reassessment.Court's Interpretation and Reasoning:- The Court noted that the notice under Section 148 was issued after the 4-year period, triggering the applicability of the first proviso to Section 147.- The Court emphasized that for re-assessment, there must be an allegation of failure to disclose material facts, supported by specific details of what was not disclosed.- The Court found that the reasons for re-opening did not allege any failure to disclose material facts and, in fact, the information was based on documents submitted by the petitioner during the assessment proceedings.- The Court concluded that the re-assessment proceedings lacked a valid ground for re-opening and should be quashed.Key Evidence and Findings:- The petitioner had submitted all relevant details along with the return of income during the assessment proceedings.- The Court highlighted that the assessing officer had raised queries during the assessment process, and the petitioner had responded to these queries adequately.- The issue in question had been discussed in the assessment order, indicating that there was no failure to disclose material facts.Application of Law to Facts:- The Court applied the provisions of Section 147 and the relevant case law to determine the validity of the re-assessment notice.- It analyzed the facts presented, including the petitioner's compliance with queries and the absence of any failure to disclose material facts.Treatment of Competing Arguments:- The petitioner argued that the notice should be quashed due to the absence of any failure to disclose material facts.- The respondent contended that there was a misrepresentation by the petitioner regarding a deduction under Section 36(1)(vii) and that this constituted a failure to disclose material facts.Conclusions:- The Court held that the notice under Section 148 was invalid as there was no failure on the part of the petitioner to disclose material facts necessary for assessment.- The Court relied on previous decisions, including one involving the same petitioner, to support its conclusion.- The Court quashed the impugned notice and set aside the re-assessment proceedings.Significant Holdings:- The Court's decision emphasized the importance of disclosing all material facts for re-assessment under Section 147.- The judgment established that re-assessment cannot be based on a mere change of opinion by the assessing officer without any failure to disclose material facts.In conclusion, the Bombay High Court's judgment in this case focused on the necessity of demonstrating a failure to disclose material facts for the validity of re-assessment under the Income-tax Act, ultimately leading to the quashing of the impugned notice in this instance.

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