2012 (7) TMI 337 - HC - Income Tax

Challenging the initiation of proceeding u/s 147/148 - Held that - The reasons for reopening the assessment communicated do not indicate the satisfaction of the first proviso to Section 147 namely failure on the part of the petitioner to fully and truly disclose all material facts necessary for the assessment which took place on 18th December,2006 in respect of the Assessment Year 2004-05. Therefore, the notice was completely without jurisdiction- the ground for reopening of the assessment is only that earlier assessment allowing depreciation on goodwill and set off of unabsorbed depreciation was erroneous, this would amount to a mere change of opinion and would not give jurisdiction to reopen the concluded assessment - Hence the jurisdictional requirement to reopen the assessment after more than four years from the end of the relevant assessment 2004-05 is not satisfied - in favour of assessee.

Issues Involved:
1. Jurisdiction to reopen assessment under Section 148 of the Income Tax Act, 1961.
2. Requirement of failure to disclose material facts for reopening assessment after four years.
3. Validity of reopening assessment based on change of opinion.
4. Appropriateness of remanding the matter to the Assessing Officer.

Detailed Analysis:

1. Jurisdiction to Reopen Assessment under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 29th November 2010 under Section 148 and the subsequent order dated 4th November 2011 rejecting the petitioner's objections. The notice aimed to reopen the assessment for the Assessment Year 2004-05, initially completed on 18th December 2006. The petitioner argued that the reopening was without jurisdiction as it did not satisfy the conditions stipulated under the proviso to Section 147 of the Act. Specifically, it was contended that there was no failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment.

2. Requirement of Failure to Disclose Material Facts for Reopening Assessment After Four Years:
The court noted that the notice under Section 148 was issued more than four years after the end of the relevant assessment year. According to the proviso to Section 147, reopening an assessment after four years requires two conditions: a reasonable belief that income has escaped assessment and a failure by the petitioner to fully and truly disclose all material facts. The court found that the reasons provided for reopening did not indicate any such failure by the petitioner. The reasons recorded and the order dated 4th November 2011 did not rely on any new tangible material that was not disclosed during the original assessment proceedings.

3. Validity of Reopening Assessment Based on Change of Opinion:
The court emphasized that reopening an assessment based on a mere change of opinion is not permissible. The grounds for reopening were that the original assessment erroneously allowed depreciation on goodwill and set off of unabsorbed depreciation. The court held that this constituted a review rather than a reassessment, which is not allowed under Section 147. The Supreme Court in CIT v. Kelvinator of India clarified that the power under Section 147 is to reassess, not to review. The court also referenced Hindustan Liver Ltd. v. R. B. Wadkar, which underscored that reasons for reopening must clearly state any failure to disclose material facts, and no additions or inferences can be made beyond the recorded reasons.

4. Appropriateness of Remanding the Matter to the Assessing Officer:
The respondent argued for remanding the matter to the Assessing Officer to address the objections appropriately. However, the court found that the order dated 4th November 2011 had already dealt with the objections and concluded that the reopening was due to an erroneous assessment. Therefore, remanding the matter would serve no purpose. The court distinguished this case from Skol Breweries Ltd., where remand was appropriate, by noting that the lack of jurisdiction was evident in the reasons recorded for reopening.

Conclusion:
The court quashed and set aside the notice issued under Section 148 on 29th November 2010 and the order dated 4th November 2011. The rule was made absolute, and the petition was disposed of with no order as to costs.

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