2014 (3) TMI 773 - HC - Income Tax

Validity of notice u/s 148 of the Act Reopening of assessment Held that - The notice has been issued on 22 March 2013 seeking to reopen the assessment for assessment year 2006-07 - The reasons for reopening as well as the order dated 12 January 2014 proceed on the basis that the petitioner ought to have known that the company was contemplating buyback of its shares at Rs.251/per share and that this not sharing of information amount to suppression - This is merely an opinion/inference drawn not from any tangible material such as notice etc. but merely on the suspicion that the petitioner ought to have known - There is no tangible material to indicate that the petitioner had knowledge on the date when it sold 291 lacs shares to PSPL ESOP Management Trust at Rs.143/per share that there was to be a scheme of buyback of share at Rs.251/per share in the future - The allegation of suppression is made without any factual basis in support of the same. The present proceeding seeking to reopen an assessment for assessment year 2006-07 is without jurisdiction as there has been true and full disclosure of all material particulars necessary for assessment by the petitioner during the assessment proceeding leading to the assessment order dated 20 February 2008 for assessment year 2006-07 thus, there is no reason to consider the petition s submission on merits that in view of Section 148 of the Act and the notice dated 26 March 2013 is exfacie unsustainable thus, the notice u/s 148 of the Act set aside Decided in favour of Assessee.

Summary

Issues:
Challenge to notice under Section 148 of the Income Tax Act, 1961 for reopening assessment for assessment year 2006-07 and order disposing of objections to reopening.

Analysis:
1. The petitioner filed the return of income for assessment year 2006-07 on 27 July 2006, and the Assessing Officer assessed the income at Rs.7.06 crores on 28 February 2008 under Section 143(3) of the Act.

2. The Assessing Officer issued a notice under Section 148 of the Act on 22 March 2013 to reassess the petitioner's income for the same assessment year. The reasons for reopening mentioned suppression in the sale price of shares leading to an alleged escape of income amounting to Rs.3,14,73,360.

3. The petitioner objected to the reopening, arguing that it was based on a mere change of opinion and all material facts were disclosed during the original assessment proceedings.

4. The Assessing Officer, in the order dated 12 January 2014, held that the reopening was valid and not a change of opinion, citing discrepancies in the sale prices of shares as the basis for reassessment.

5. The petitioner contended that the notice was unsustainable as it aimed to substitute "full value of consideration received" with "fair value" under Section 48 of the Act, which is impermissible.

6. The High Court noted that the impugned notice was issued beyond four years from the end of the assessment year, requiring a failure to disclose material facts by the assessee for valid reopening. However, there was no such failure alleged in the reasons or the order rejecting objections.

7. The Court found that the reassessment was without jurisdiction as there was full disclosure of material particulars during the original assessment, and the Assessing Officer's change in view was impermissible. The notice and order were quashed and set aside.

8. The petition was allowed with no order as to costs, concluding the legal judgment on the challenge to the notice and order for reopening the assessment for assessment year 2006-07 under the Income Tax Act, 1961.