2012 (12) TMI 695 - HC - Income Tax

Reopening of assessment - beyond the period of 4 years - no mention of inclusion/ exclusion of excise duty paid on raw materials purchased and consumed - Held that - Persuing the return filed by the petitioner he had disclosed sales (including Sales Tax and Excise Duty) of Rs.15.46 crores (rounded off) & Schedule H mentioning that there are certain loans and advances, one of which was of Rs.84.58 lakhs pertaining to balance lying with the Excise Authorities. Such balance, it is a common ground, pertains to MODVAT Credit. Thus as the petitioner had made necessary disclosure and had excluded such amount from the computation of income. Even in the reasons recorded, Assessing Officer has stated that on verification of the case records, it is noticed that .... Thus, the material which the Assessing Officer relied in the reasons recorded, emanates from the record itself - no reason to reopen the assessment - in favour of assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reopening assessment beyond the prescribed period.

Analysis:
The petitioner, a registered company, filed its return of income for the assessment year 1997-98, declaring a loss. The Assessing Officer issued a notice under Section 143(2) and completed the scrutiny assessment under Section 143(3). Subsequently, the Assessing Officer sought to reopen the assessment beyond four years from the end of the relevant assessment year. The reasons for reopening included the exclusion of excise duty from sales, leading to an alleged income escape of a specific amount. The petitioner raised objections, citing full disclosure and legal precedents. The Assessing Officer rejected the objections, prompting the petitioner to challenge the notice. The petitioner argued that there was no failure to disclose material facts, emphasizing the inclusion of MODVAT Credit in the return and the lack of specific allegations by the Assessing Officer. The petitioner's objections were not adequately addressed by the Assessing Officer, who focused on procedural aspects rather than the substance of the disclosure issue.

The High Court analyzed the return filed by the petitioner, noting the disclosure of sales and loans, including MODVAT Credit. The court observed that the reasons for reopening were based on information already in the records, indicating no failure on the petitioner's part to disclose material facts. The court highlighted the petitioner's consistent stance on full disclosure, contrasting with the vague responses from the Revenue. The court emphasized that the Assessing Officer did not establish any failure to disclose material facts, a prerequisite for reopening assessments beyond the prescribed period. Consequently, the court quashed the notice dated 24.09.2002, ruling in favor of the petitioner based on the lack of jurisdiction to reopen the assessment. The court refrained from opining on the validity of the reasons, as the jurisdiction issue was determinative.

In conclusion, the High Court held in favor of the petitioner, quashing the notice for reopening the assessment due to the absence of a failure to disclose material facts within the prescribed period. The court emphasized the importance of full disclosure by the assessee and the necessity for Assessing Officers to establish such failures before reopening assessments beyond the statutory timeframe.