2013 (7) TMI 847 - HC - Income Tax

Reopening of assessment u/s 147 - issuance of notice beyond 4 years - Held that - the original assessment came to be framed u/s 143(3) the assessment is sought to be reopened after the expiry of a period of four years from the end of the relevant assessment year - hence the proviso to section 147 of the Act would clearly be attracted - for the purpose of assumption of valid jurisdiction on the part of the AO he should have reason to believe that income chargeable to tax has escaped assessment by reason of failure on the part of the petitioner to disclose fully and truly all material facts necessary for his assessment merely because the AO has sought to reopen the assessment finds the proof submitted by the assessee at the time of assessment proceedings to be not sufficient for the purpose of admitting the claim - it cannot be said that there was any failure on the part of the assessee so as to invoke the provisions of section 147- the notice u/s 148 cannot be sustained appeal decided in favour of assessee

Summary

Issues:
Challenge to notice dated March 30, 2001, reopening assessment for the assessment year 1991-92 under section 148 of the Income-tax Act, 1961.

Analysis:
The petitioner challenged the notice issued for reopening the assessment beyond the four-year period from the relevant assessment year. The petitioner argued that the notice was invalid as there was no failure to disclose all material facts necessary for assessment. The petitioner contended that the Assessing Officer lacked jurisdiction under section 147 of the Act due to the absence of any obligation to submit purchase deed while claiming exemption under section 54 of the Act.

The respondent argued that the petitioner's failure to produce supporting evidence like purchase deed for claiming exemption under section 54 amounted to a lack of disclosure of material facts necessary for assessment. The respondent justified invoking section 147 of the Act even after the four-year period from the relevant assessment year had expired.

The court emphasized that for the Assessing Officer to have valid jurisdiction under section 147, two conditions must be met: income must have escaped assessment, and such escapement must be due to the petitioner's failure to disclose all material facts. The court analyzed whether the petitioner's omission to furnish the purchase deed during the original assessment constituted a failure to disclose material facts as required by the law.

The court noted that the petitioner had claimed exemption under section 54 by stating the necessary material facts, including the property details and purchase price, in the statement of income submitted with the return. The petitioner had provided proof of payment through receipts issued by two parties, which were accepted by the Assessing Officer during the original assessment.

The court clarified that the requirement under section 147 is to furnish material facts, not proof. The court distinguished between submitting material facts and proof, stating that the Act imposes an obligation to produce proof only where explicitly required. The court found that the reasons recorded did not establish any failure on the petitioner's part to disclose fully and truly all material facts necessary for assessment.

Ultimately, the court ruled in favor of the petitioner, quashing the impugned notice issued under section 148 of the Act for the assessment year 1991-92. The court held that the notice could not be sustained as there was no failure on the petitioner's part to disclose material facts, thereby allowing the petition with no order as to costs.