2005 (11) TMI 41 - HC - Income Tax

Notice of reopening the assessment of income of the petitioner under section 148 - when the decision to reopen the matter itself is taken beyond the period provided and when there is no failure on the part of the assessee to disclose the relevant material, the assessee cannot be put into another jeopardy by reopening the matter - petition deserves to be allowed and we quash and set aside the notice dated March 29, 2004, issued under section 148 of the Income-tax Act and also the consequent reassessment order made on February 28, 2005

Summary

Issues involved:
Challenge to order of reopening assessment under section 148 of the Income-tax Act for the year 1998-99. Dispute between a public limited company and the Income-tax Department regarding the addition of interest while arriving at the book profit under section 115JA of the Income-tax Act. Jurisdiction of authorities to reopen assessment proceedings based on failure to disclose material facts. Interpretation of proviso to section 147 of the Income-tax Act regarding the time limit for reopening assessments. Applicability of relevant case laws in determining the validity of reassessment orders.

Analysis:

The High Court of BOMBAY heard a petition challenging the order of reopening the assessment of a public limited company under section 148 of the Income-tax Act for the year 1998-99. The dispute arose from the addition of interest to the book profit under section 115JA of the Income-tax Act. The petitioner contended that there was no failure to disclose relevant information during the initial assessment. The court noted that the proviso to section 147 of the Income-tax Act allows the reopening of assessments only within four years, unless there is a failure on the part of the assessee to make a correct return. The petitioner relied on a Division Bench judgment emphasizing that without a failure to disclose all material facts, the Assessing Officer lacks jurisdiction to reopen assessment proceedings.

During the proceedings, the petitioner highlighted that the matter was pending before the High Power Committee, and authorities were not expected to pass the reassessment order while the dispute was ongoing. The petitioner also referred to a Supreme Court judgment regarding the reopening of assessments beyond the prescribed time limit. The respondent, on the other hand, cited a different Supreme Court judgment to support the permissibility of reassessment even without any omission or failure on the part of the assessee. However, the court opined that when the decision to reopen the assessment is made beyond the specified period and there is no failure to disclose relevant material, the assessee should not face additional jeopardy.

In its judgment, the High Court allowed the petition and quashed both the notice of reopening the assessment and the consequent reassessment order. The court held that when there is no failure on the part of the assessee to disclose material facts and the decision to reopen the assessment is beyond the prescribed period, the reassessment cannot be upheld. The ruling was made absolute in favor of the petitioner, with no costs imposed.

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