2006 (3) TMI 105 - HC - Income Tax

Reassessment under section 147 - limitation - assessee-company had fully and truly disclosed all material facts necessary for computing the depreciation allowance in the course of the original assessments completed under section 143(3) itself, the period of limitation applicable to the reopening for these two years would be a period of four years prescribed in the proviso to section 147 of the Income-tax Act, 1961. For the said two years, notice under section 148 had been issued after the expiry of four years from the end of the assessment years, 1992-93 and 1993-94. - Therefore, any notice issued after the expiry of four years from the end of the relevant assessment year, is illegal and is without jurisdiction.

Summary

Issues Involved:

1. Whether the reassessment under section 147 of the Income-tax Act was time-barred.
2. Whether the assessee-company had fully and truly disclosed all material facts necessary for the assessment.
3. Validity of the Assessing Officer's notice under section 148 issued after the expiry of four years from the end of the relevant assessment year.
4. The applicability of the proviso to section 147 of the Income-tax Act.

Detailed Analysis:

1. Whether the reassessment under section 147 of the Income-tax Act was time-barred:

The Tribunal had to determine if the reassessment notices issued by the Assessing Officer under section 148 were within the permissible time frame. The original assessments for the years 1992-93 and 1993-94 were completed under section 143(3). The reassessment notices were issued on July 17, 1998, which was beyond the four-year limitation period prescribed under the proviso to section 147. The Tribunal found that the reassessment notices were issued after the expiry of four years from the end of the relevant assessment years, rendering them time-barred and without jurisdiction.

2. Whether the assessee-company had fully and truly disclosed all material facts necessary for the assessment:

The Tribunal examined whether the assessee-company had disclosed all material facts necessary for the assessments, particularly concerning the computation of depreciation allowance. The assessee-company had submitted a full set of accounts, including profit and loss accounts, balance sheets, schedules, details of machinery and assets acquisition, and lease agreements. The Tribunal concluded that the assessee-company had fully and truly disclosed all material facts necessary for the assessments, thus fulfilling its obligation under the law.

3. Validity of the Assessing Officer's notice under section 148 issued after the expiry of four years from the end of the relevant assessment year:

The Tribunal referred to the proviso to section 147, which stipulates that no action shall be taken after four years from the end of the relevant assessment year unless there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Since the assessee-company had disclosed all necessary facts, the Tribunal found that the notices issued under section 148 were invalid as they were issued beyond the four-year limitation period.

4. The applicability of the proviso to section 147 of the Income-tax Act:

The Tribunal highlighted that the proviso to section 147 imposes a four-year limitation period for initiating reassessment proceedings unless the income escaped assessment due to the assessee's failure to disclose material facts. The Tribunal cited the judgment in Fenner (India) Ltd. v. Deputy CIT, which clarified that the Assessing Officer must record the reasons for his belief that income escaped assessment and the failure of the assessee to disclose material facts. In this case, the Tribunal found no such failure on the part of the assessee, making the reassessment notices invalid.

Conclusion:

The Tribunal concluded that the reassessment notices issued under section 148 for the assessment years 1992-93 and 1993-94 were time-barred and without jurisdiction. The assessee-company had fully and truly disclosed all material facts necessary for the assessments, and the notices were issued beyond the four-year limitation period prescribed under the proviso to section 147. Consequently, the reassessments were set aside, and the appeals were dismissed in favor of the assessee.