2005 (8) TMI 63 - HC - Income Tax

Reopening of assessment limitation - Since the reopening is beyond the period of four years, in the absence of any material to show that there is failure on the part of the assessee to disclose fully and truly all material facts, the reopening of the assessment cannot be sustained - mere fact that a protective assessment has been made in the case of some other assessee on the ground that the income of that assessee is assessable in the hands of the assessee herein cannot be a ground to reopen the concluded assessment of the assessee - notices issued are without jurisdiction and the same are liable to be quashed and set aside on this short ground

Summary

Issues:
Challenge against reopening of completed assessment based on lack of disclosure of reasons and legality of reasons recorded.

Analysis:
The petitioner challenged the legality of the reasons recorded for reopening completed assessments. The petitioner requested disclosure of reasons from the Assistant Commissioner of Income-tax but received no response, leading to the invocation of writ jurisdiction under article 226 of the Constitution of India. The court issued a rule in the petition with interim relief. The respondents later disclosed the reasons for reopening the assessments. The petitioner argued that the reasons recorded did not show any material to indicate income escapement or failure to disclose material. The power to reopen was exercised after four years from the assessment year end, necessitating an allegation of failure to disclose material for such action. The petitioner contended that reopening could not be based on a change of opinion, citing relevant judgments.

The court considered submissions from both parties. The petitioner's counsel argued that the reasons recorded were insufficient and did not establish failure to disclose material facts. The counsel relied on various court judgments to support the argument that reopening assessments beyond four years requires failure to fully disclose material facts. The respondent's counsel contended that the writ petition was not maintainable due to alternate remedies. However, it was acknowledged that without knowing the reasons for reopening, the petitioner could not pursue alternate remedies effectively.

The court found that the reopening of assessments beyond four years lacked justification based on available records. The reasons recorded did not indicate failure to disclose material facts by the assessee. Merely because a protective assessment was made for another assessee did not warrant reopening the concluded assessment. As the conditions for reopening beyond four years were not met, the court held that the notices were without jurisdiction and quashed them. The court did not delve into other points raised by the petitioner's counsel. Consequently, the petition was allowed, the impugned notices were quashed and set aside, and the rule was made absolute with no costs awarded.