2010 (1) TMI 406 - HC - Income Tax

Reassessment- The assessee company was engaged in the manufacture of steel tubes and strips. It had taken certain plant and machinery on lease from T. it submitted return of loss for the assessment years 1997-98 and 1998-99. Subsequently the assessee found some technical problems in the transaction and to avoid litigation as also to purchase peace, it offered back only the balance. The assessment were completed accepting the revised returns. However, notice under section 148 of the Act were issued. The Tribunal held that reassessment proceedings were not valid. Held that- in the revised return, the assessee had disclosed the entire facts, and therefore, the Commissioner(Appeals) as well as Tribunal had rightly reached the conclusion that it was not a case where the assessee had failed to disclose fully and truly all material facts necessary for its assessment. Thus the reassessment proceedings not valid.

Summary

Issues:
Reopening of assessments under section 147/148 of the Income-tax Act beyond the prescribed period.

Analysis:
The case involved appeals against the reopening of assessments for the assessment years 1997-98 and 1998-99 beyond the prescribed period under section 147/148 of the Income-tax Act. The respondent, a company engaged in manufacturing, had taken plant and machinery on lease and later offered back the principal amount due to technical issues. The Assessing Officer issued notices under section 148 of the Act beyond four years from the end of the relevant assessment years, leading to objections from the respondent. The Commissioner of Income-tax (Appeals) and the Tribunal held that the reopening of assessments was not sustainable as the respondent had disclosed all material facts necessary for assessment in the revised returns submitted before the final assessment.

The appellant contended that the Commissioner and the Tribunal erred in interfering with the reopening of assessments and quashing the assessment orders. However, the High Court noted that under section 147 of the Act, assessments can be reopened only if income has escaped assessment due to the assessee's failure to disclose material facts. In this case, it was established that the respondent had fully and truly disclosed all material facts necessary for assessment through the revised returns, which were duly considered by the Assessing Officer. Therefore, the notices issued under section 148 after the expiry of four years were deemed beyond the jurisdiction of the Assessing Officer.

The High Court concluded that the appeals did not raise any substantial question of law under section 260A of the Act. Consequently, the appeals were dismissed, affirming the decision of the Tribunal. The judgment emphasized that in cases where the assessee has disclosed all material facts required for assessment, reopening assessments beyond the prescribed period is not permissible under the Income-tax Act.