2012 (7) TMI 700 - HC - Income Tax

Reopen the assessment - notice u/s 148 - excess deduction u/s 80IB had been allowed - Held that - The reasons recorded by AO shows that it was upon verification of the return of income for the relevant assessment years that it was found that the petitioner had other income which was not eligible for deduction under section 80 IB and that the same had not been considered at the time of assessment under section 143(3) r.w.s 147 - that by not doing so excess deduction had been allowed to the assessee under the said section. Thus, it is apparent that the Assessing Officer has not come across any new material, which the petitioner had failed to disclose - nothing whatsoever on record to indicate that there was any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment - in favour of assessee.

Summary

Issues:
- Validity of reopening assessment for assessment years 2002-03 and 2003-04 under section 148 of the Income Tax Act, 1961.

Analysis:
1. The judgment involves the challenge to individual notices dated 12.09.2008 seeking to reopen the assessment of the petitioner for assessment years 2002-03 and 2003-04. The petitioner, a Private Limited Company manufacturing aluminum conductors, had filed returns for the respective years. The assessment for 2002-03 was reopened primarily due to discrepancies related to business income and claimed deductions under section 80 IB of the Act. The assessment for 2003-04 was sought to be reopened based on the petitioner's other income not eligible for deduction under section 80 IB. The reasons for reopening assessments were scrutinized by the court.

2. The petitioner contended that the reopening of assessments after four years from the end of the relevant assessment years was invalid as there was no failure on their part to disclose material facts. The Assessing Officer's belief that income chargeable to tax had escaped assessment was based on verification of the filed returns, not on new undisclosed material. The petitioner argued that without any failure on their part, the Assessing Officer's jurisdiction under section 147 of the Act was unauthorized.

3. The respondent argued that the petitioner's claim for deductions under section 80 IB for income not eligible was a failure to disclose material facts necessary for assessment. The respondent contended that the Assessing Officer had valid jurisdiction to reopen assessments beyond the four-year limit based on the petitioner's incomplete disclosure.

4. The court observed that the impugned notices were issued beyond the four-year limit for both assessment years. It was crucial for the Assessing Officer to form a belief that income had escaped assessment due to the petitioner's failure to disclose material facts fully and truly. However, the reasons recorded for reopening assessments did not indicate any failure on the petitioner's part to disclose necessary facts. The Assessing Officer's conclusion was solely based on the verification of the filed returns, not on undisclosed material.

5. The court found that the Assessing Officer lacked authority of law to assume jurisdiction under section 147 of the Act as there was no evidence of the petitioner's failure to disclose material facts leading to the alleged escapement of income chargeable to tax. Consequently, the court allowed the petitions, quashing and setting aside the impugned notices dated 12.09.2008 for assessment years 2002-03 and 2003-04. The rule was made absolute with no order as to costs.