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2013 (5) TMI 388 - HC - Income TaxReopening of assessment Validity of notice issued u/s 148 - Escaped Income As per revenue there are two reasons (i) question of the interest income as assessee company advanced a loan to society which earned interest on the special fund but did not disclose it in its return as the money belonged to Assessee Company (ii) that the petitioner had claimed expenses as revenue expenses which were actually of a capital nature. Held that - Following the decision of Wel Intertrade Private Ltd 2008 (8) TMI 18 - HIGH COURT DELHI we had agreed with the view taken by the Punjab & Haryana High Court in the case of Duli Chand Singhania 2003 (12) TMI 23 - PUNJAB AND HARYANA High Court that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing officer under Section 147 beyond the four year period would be wholly without jurisdiction. In the present case also, there is no whisper in the purported reasons of the petitioner having failed to disclose fully and truly all the material facts necessary for its assessment. Thus, the necessary ingredients of the provisions of Section 147 are not satisfied.
Issues:
1. Reopening of assessment for the assessment year 2004-05 based on notice under Section 148 of the Income-tax Act, 1961. 2. Compliance with the conditions stipulated in the proviso to Section 147 regarding failure to disclose material facts. 3. Allegation of income escaping assessment due to interest income and expenses claimed as revenue expenditure. --- Issue 1: Reopening of Assessment The petition challenged the notice under Section 148 for the assessment year 2004-05, issued on 21.03.2011, seeking to reopen the assessment. The reasons for believing that income had escaped assessment included the treatment of expenses as revenue instead of capital, and interest income from a loan advanced to a society. The notice was issued beyond the four-year period from the end of the assessment year, raising concerns about compliance with the proviso to Section 147. --- Issue 2: Compliance with Proviso to Section 147 The petitioner argued that the essential condition of failure to disclose fully and truly all material facts necessary for assessment, as required by the proviso to Section 147, was not alleged in the reasons provided. Citing precedent, it was contended that the absence of such an allegation rendered the notice and subsequent proceedings invalid. The revenue contended that all procedural requirements were met, including obtaining permission from the Commissioner, and that the interest income was not disclosed by the petitioner. --- Issue 3: Allegation of Income Escaping Assessment The revenue argued that the interest income in question arose from a loan to a society and was only brought to light following a Tribunal order. Additionally, there was a dispute regarding expenses claimed as revenue expenditure but allegedly of a capital nature. The Court considered previous decisions and concluded that the petitioner had not failed to disclose all material facts necessary for assessment, rendering the initiation of reopening the assessment for the assessment year 2004-05 legally unsound. --- The Court ruled in favor of the petitioner, holding that the notice under Section 148 and all subsequent proceedings, including the assessment order, were to be set aside due to the lack of legal backing. The judgment emphasized the importance of fulfilling the conditions stipulated in the law for reopening assessments beyond the prescribed period. Consequently, the writ petition was allowed, and no costs were awarded.
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