2011 (1) TMI 1033 - HC - Income Tax

Reopening of assessment - deduction u/s 80P(2) - Validity of notice - beyond a period of four years from the end of the relevant assessment year - Held that - It is apparent that the basic requirement for assuming jurisdiction under section 147 beyond a period of four years from the relevant assessment year is not satisfied as the belief as to escapement of income chargeable to tax from assessment, has not been entertained by the Assessing Officer on the ground that there has been failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The only ground for reopening the assessment is the decision of Madhya Pradesh co-operative Bank Ltd. v. Addl. CIT 1996 (1) TMI 8 - SUPREME Court which stands overruled by a subsequent decision rendered in the case of CIT v. Karnataka State Co-operative Apex Bank 2001 (8) TMI 9 - SUPREME Court . In the circumstances, the very basis for reopening the assessment no longer survives. Hence, even on the merits the reopening of assessment is not sustainable. Decided in favor of the assessee

Summary

Issues:
Challenge to notice under section 148 of the Income-tax Act, 1961 for reopening assessment for the assessment year 1991-92.

Analysis:
1. The petitioner, a co-operative bank, challenged a notice dated March 21, 1997, issued under section 148 of the Income-tax Act, 1961, for reopening its assessment for the assessment year 1991-92. The petitioner had initially declared a gross income of Rs. 4,47,58,268, claiming deduction under section 80P(2) of the Act. The assessment was framed at Rs. 3 lakhs. The petitioner contended that the notice was issued beyond the four-year limit from the end of the relevant assessment year, and there was no failure to disclose material facts necessary for assessment.

2. The petitioner argued that under section 147 of the Act, the Assessing Officer can reassess income that has escaped assessment, subject to certain conditions. The petitioner maintained that none of the conditions applied in their case, as there was no failure to disclose material facts during the assessment proceedings. The respondent, in their affidavit-in-reply, did not address this contention, leading to a lack of jurisdiction for reopening the assessment.

3. The petitioner's senior advocate highlighted that the reopening of assessment, based on a Supreme Court decision, was not sustainable beyond the four-year limit. The respondent's reliance on the decision of the Madhya Pradesh Co-operative Bank Ltd. case was challenged, citing a subsequent overruling by the Supreme Court in the case of CIT v. Karnataka State Co-operative Apex Bank. The advocate argued that even on merits, the reopening of assessment was not justifiable.

4. The High Court, after considering the facts and arguments, found that the notice under section 148 of the Act was issued beyond the four-year limit without any failure on the petitioner's part to disclose material facts. The court noted that the only ground for reopening the assessment was based on a decision that had been overruled, rendering the reopening unsustainable. Consequently, the court quashed and set aside the impugned notice, ruling in favor of the petitioner.

In conclusion, the High Court's judgment in this case revolved around the jurisdictional validity of the notice issued under section 148 of the Income-tax Act, 1961, for reopening the assessment for the assessment year 1991-92. The court found that the notice was issued beyond the prescribed time limit and lacked a valid ground for reassessment, ultimately ruling in favor of the petitioner and quashing the notice.